 Never gamble
Helping Traders Confront Their Fears
By DIANA B. HENRIQUES
Sunday, January 3, 1999
Copyright 1999 The New York Times
NEW YORK -- 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."
|
