Man of letters, just like the original Voltaire, this post is not directed at you. But you can add some more pointers on a daily basis for wannabe traders to become successful in this game of chickens.
Thank you. And as always, good luck. See you at the races.
Beni Mick Mormony
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Street Psychology
So you want to be a top-notch trader? Dr. Ari Kiev, a Manhattan psychiatrist who also coaches Wall Street traders, lists five points for individual investors to consider before they go on line and start buying and selling stocks.
MAKE SURE YOU HAVE THE STOMACH FOR IT
Recall earlier losses and risk-taking in your life. How did you handle it? How did you feel about it?
LIMIT THE UNIVERSE
Confine your trading to a diverse but limited number of stocks.
STUDY, STUDY, STUDY
Before trading, spend at least six months learning about the companies and their trading patterns.
SET REALISTIC, SPECIFIC AND MEASURABLE GOALS
Don't trade with the grocery fund the mortgage payment. And don't trade only to "make money." Trade to make a specific amount of money in a certain amount of time.
HOW'M I DOIN'?
Ask an objective outsider to review your progress, measuring it against your goals.
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Helping Traders Confront Their Fears
Over the years, Dr. Ari Kiev, Manhattan psychiatrist and author, has researched witch doctors, counseled suicidal students and advised Olympic athletes. What better preparation could he have for coaching Wall Street's traders?
"I had a guy who would hold onto a position while it was dropping," Kiev said during a recent interview in his sunny office on Manhattan's Upper East Side. "He always had good reasons, but it turned out he was really doing it because he could not tolerate selling the stock and then seeing it go up."
And then there was the fellow who, while building up a position in a particular stock, would become emotionally derailed if it dropped. Instead of seeing such dips as possible buying opportunities, he saw them as losses on the shares he already owned, a perception that eroded his courage.
"There is another guy who makes $500,000 a month, month after month, but he cannot exceed that number," Kiev continued. "Even if he makes the $500,000 in the first week of the month, he still can't make more that month. He has limited himself but doesn't realize it."
These are the thorny problems that Kiev tackles in his unusual role as "trading coach" to several successful Wall Street hedge funds. That work began when Steven A. Cohen, the founder of SAC Capital Management, a hedge fund in Greenwich, Conn., invited Kiev to work with the traders at his firm.
Kiev's experience formed the basis for his new book, "Trading to Win: The Psychology of Mastering the Markets," just published by John Wiley & Sons.
The book, at $34.95, is pricey enough to fit the lofty tax bracket of its potential audience. But it comes with an endorsement from Cohen, who said that the "proactive trading program" that he set up with Kiev at his firm helped his fund grow from "a $20 million hedge fund to one handling over $500 million annually after only five years."
The book is filled with anecdotes about unsuccessful strategies -- behavior that many traders, amateur or professional, may recognize with a groan -- and with stern sidelines advice. "Macho trading is equivalent to not facing reality," it says.
Most traders, as Cohen wrote in his introduction, "are indecisive, lack conviction, and are afraid of taking risks and making mistakes;" moreover, they are "unaware of the personal demons that are holding them back from true success."
Helping traders wrestle with those personal demons is Kiev's job, although he says his coaching differs from the rest of his practice, where he is best known for his research on suicide prevention and for his treatment of depression, anxiety and obsessive-compulsive disorder.
Nevertheless, he still sees connections. Many of his psychiatric treatment techniques involve helping people confront what he calls their self-created fears and change self-defeating behavior. That approach can also help Wall Street traders, he said.
"I've encountered a guy making $30 million a year who is still afraid, who doesn't feel like a success," Kiev said, shaking his head in empathy.
His gift as a coach is that he seems genuinely sympathetic to such problems. He speaks passionately about helping people "find the dream or the vision for their life and then helping them create the tension between what they really want and what they have settled for because they were afraid."
Settling for $30 million a year might not be difficult for many of us, but Kiev's work with demon-plagued traders is not about -- well, not only about -- making more money. It is about realizing one's potential and living life to the fullest, he said.
Trading "is not a game that tolerates your complacency," he said.
"If you can make $1 million asleep, fine -- but wouldn't you rather be alive?" he asked. "Wouldn't you rather be in your life as fully as you can be? It's not that 'more is better' -- unless we're talking about more engagement, more involvement, more personal growth."
Kiev's work with professional traders has given him a somewhat alarming insight into the risks of amateur day-trading, which has become a popular pastime in many middle-class American households.
"It's like handing children the keys to the car," he said with a visible shudder. Even he, with years of experience on the sidelines at some of the industry's smartest trading desks, prefers to leave the management of his finances to others. Why? Because it takes so much time to master the skills required -- time he would rather spend pursuing his own career.
Kiev said amateur traders, like professionals, should set targets that are reasonable and "consistent with your capital, after you have taken care of all your basic needs." After you have set your goals, he said, "you have to develop a system for measuring your performance, relative to your targets."
The human tendency to change the rules in the middle of the game is so strong that Kiev encourages amateur traders to identify some outsider -- a buddy, another amateur trader or even a spouse -- who can objectively compare their trading results with their goals. "We are all inclined to deny and rationalize," he said. "We need someone to keep us honest."
nytimes.com |
