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Health, Sports & Psychology

Beating stress in the City jobs: A Trader’s experiments with psychological reorientation in trading

Updated Thursday, 25th September 2008

Darren Agombar was surprised at how psychology helped reduce his stress levels, as he explains

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Two similar significant events that occurred four years apart in my professional life elicited very different emotional reactions. The first event produced a highly stressful experience that made me question my confidence and ability and even whether I should change career.

The second, four years later and almost identical in nature resulted in a very different response, and I experienced a massive reduction in the feelings of anxiety and stress, and consequently disruption to my confidence and output.

These two almost identical occurrences and my completely different responses to these events calls into question what had changed in the interim period? On reflection I wondered about the reason behind the change. What had I done or been exposed to in the prevailing four years that had caused the reduction in the stress reaction?

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Busy... or stressed?

I have spent 20 years trading financial markets, in London, Dubai and Tokyo on behalf of international banks and more recently for my own company utilising personal capital. This has given me a detailed insight to the nature of this environment and the stresses and strains individuals can suffer, including me. Trading requires a high level of decision making and the results can be virtually instant, a matter of seconds.

This contributes, along with the pressure of having to be able to react and make decisions in a very short period of time repeatedly can cause high levels of stress that can result in negative effects on confidence and performance. My own experiences of this environment support this notion and I was subject to ups and downs in my own wellbeing as I felt the force of poor runs in revenue making, and these could result in prolonged periods of anxiety.

In 2004 I started my own trading company managing my own capital, something I had long harboured a desire to do, to test myself further professionally. After an initially successful 6 months I experienced a large and unexpected loss.

This had a very negative effect on my confidence, the experience followed along similar lines to previous episodes, in that I felt stress, self doubt and anxiety but this time much worse. The loss added to the change in circumstances working for myself had resulted in such as; working alone, no regular salary, different systems etc exasperated the feelings of stress and anxiety and as a result it took a lot longer to return to profitability and regain confidence.

In the past I had been interested in books and articles on mainstream behavioural finance and had used the theories and concepts to develop my own trading strategies and understand those of the people I managed. However, these did not give me the solutions I needed to rebuild my confidence I lost after the first event and the downturn was significant enough to trigger me into sourcing a new solution. I began to research into academic psychology and decision making through the Open University library with whom I had been studying. This had almost instant results and I began to identify biases and influences that had been affecting my trading for many years, I quickly began to make fundamental changes to my approach. The result was a quick return of performance with enhanced consistency and ultimately strengthening of confidence. This positive event led me to continue to study this area and make the use of psychology and decision making an integral part of my overall strategy.

This leads me to my comparison point and how I came to realise that a by-product of my studies in psychology with the Open University has been a reduction in stress. Again I experienced a large unexpected loss when market conditions altered drastically in a short period of time. The lead up to the loss was similar to the previous experience in that I had made good profits, the loss was not larger than my risk management parameters nor did it exceed previous profits.

What was different was my reaction, I didn’t really notice it at the time, and it was not until further reflection that I realised there had been a fundamental change. At the time some of the same thoughts entered my mind, such as questioning my ability, confidence issues etc but they did not elicit the same emotional response. They did not develop into anything more than a speed bump. I was able to get back on a profitable track much more quickly than the previous experience.

I think there is sufficient evidence to conclude that gaining an understanding of how decisions are influenced by hard wired heuristics, how these can affect the efficiency of decision making in my professional arena, financial markets, has resulted in a reduction in stress levels. It challenges the belief that exists in many high reward industries involving risk taking that this has to be accompanied by stress to merit a high salary. Significantly, being able to see the affects of decisions in an abstract form has allowed some detachment from the emotional influences experienced in the past. This could have equally interesting implications for industries where high levels of decision making is required and results are judged over short periods of time such as sport and medical diagnosis and treatment.

However, in a general business environment the outcome of decisions may take longer to be valued and judged. It is more common for results to be produced quarterly or annually, meaning a much longer period of time will have passed between decisions and outcome. In this scenario accurate data from keeping a business journal would be essential to ensure accurate recall of the environment and conditions decisions were made in.





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