›  News 

Trading, Crisis and Stress Management

The recent financial crises have increased the level of stress among traders. Beyond the investment performances, the layoffs and a strong deterioration in the image of their activity continue to negatively impact them psychologically. We analyse the current state of stress on trading floors.

Article also available in : English EN | français FR

Trading and its related jobs are currently a far cry away from the Eldorado they represent during several years. Yesterday’s golden boys are now viewed as greedy leaches without morals whose economic utility is put back into question.

Olivier Godechot: «Trader bonuses cannot be justified in any way!»

During several years, Olivier Godechot has carried out a detailed research on pay packages in finance by analyzing budgets allocated to bonuses and salaries on trading floors. His task was completed by several witness (...)

It has to be said that the pay packages of some traders have shocked public opinion, especially during periods of budgetary constraints, since they are considered as major culprits of the financial crisis (sometimes they are even considered as being the main cause), Moreover the various «incredible» frauds that have been uncovered have succeeded convincing everybody of the lack of seriousness and control within this field. In France, some banks have recently expressed their growing lack of interest in some trading activities (Crédit Agricole CIB to withdraw from equity derivatives and commodities activities.) or have carried out massive layoffs that have significantly impacted this activity (Société Générale, Crédit Agricole, Deustche Bank, BNP Paribas, Natixis or even Crédit Suisse).

The traders’ point of view

What do the professionals of the field think about all that? M. Dupont [1], who has been a trader during the last 20 years (in various entities) provides several answers.

Regarding the difficult economic condition that we currently have in France what has been the evolution of stress in trading?

It is true that the overall environment of the trader has been steadily worsening during the past 10 years. Market conditions are more difficult and volatile, competition is stronger and margins have been decreasing. We also note stronger media pressure. For example, right now is the period of the bonuses and journalists are at the door of our offices trying to get information on the subject.

Following the financial crisis, some colleagues tell us that their kids have a hard time saying that their father is a trader considering the very negative view that public opinion has on this activity.
M. Dupont

Following the financial crisis, some colleagues tell us that their kids have a hard time saying that their father is a trader considering the very negative view that public opinion has on this activity. There are also massive layoffs related to the economic context and an ever more pessimistic view of the future every day.

All the elements are stress factors which have nowadays become constantly worrying and cause feelings of insecurity.

What has been the impact of the crisis on the performance of the traders and generally speaking, how do you describe the characteristics of trading since the start of the financial crisis?

The crisis has led to a massive loss of confidence. We’ve been facing for some time downward markets that are lot more difficult to manage and are consequently more stressful. Black days are more common and reinforce a negative spiral where it becomes more difficult to buy or sell and within which liquidity is sorely lacking. The economic context has become more demanding while traders have less means to achieve their goals. This ends up in considerably degrading individual and collective performance.

The best traders are those with experience. They are those who have been through the last stock market storms and the krachs without too much damage and who are armed to face the complexity of financial markets.
M. Dupont

Indeed since September 11, risk apprehension has changed. This global event has disturbed the global economy and caused extraordinary overnight. Since that day, the context has become permanently worrying since it keeps up a constant state of alert that did not exist previously. In our minds somewhere, the idea has stayed that the worst can happen at any moment.

This permanent state of alert causes a hyper investment among some which ends up demoralising or embittering. Their efforts are not rewarded according to them and are usually the start of addictive and unsuitable behaviour.

What are the qualities required to face complexity when you are a trader? What are the major criteria?

In this complex and competitive universe, one needs to be strong both in mind and body in order to:

Thami Kabbaj : « Behavioral finance has shown the presence of psychological biases among traders »

According to Thami Kabbaj, some traders are in a state of cognitive dissonance: They totally obscure the loss and focus solely on the information that reinforces.

- Be adaptable: Indeed, one must be able to plan for everything, anticipate, think and organize at every moment. Anything can happen and it is necessary to be able to gather ideas in order to for example propose the best price in 10 seconds when this was the least expected. This could happen when the trader is facing a brutal market downturn and trying to manage it as well as he can.
- Remain calm at all times. This is one of the major qualities of the trader who must manage very stressful, complicated and unknown situations
- Have a good mastery of oneself. This is necessary when facing the markets, when interacting with colleagues or close individuals despite a tense atmosphere in order to maintain a climate that is open, open and constructive.
- Have experience: The best traders are those with experience. They are the ones who have gone through the last market storms and the krachs without too much damage and are armed to face the complexity of financial markets.

Alternative solutions for stress management.

Aware of the current situation on the markets, some actors have adapted themselves. It is the case of the recruitment firm, Norman Alex (A firm specialized in banking profiles) which has chosen to widen its offer by acquiring the services of human management specialist. The aim is to provide its clients with the keys to a long term success both in their professional and personal lives. The firm associated itself with Sens&Vie, a diagnostic centre that works on treating problems related to sleep stress and fatigue stress.

According to Mélanie Perrin, founder and managing director of Sens&Vie, when faced with the world’s complexity, to insecurity and to competition, it is important to one the one hand recover and on the other hand take a step back from the events that we go through. Her structure proposes a personalised approach of men and women in the management of their resources

The original idea of Sens&Vie is to associate a rigorous medical approach to a neuroscientific one that aims to rebalance the health capital. This is done through a wellbeing department that offers a range of care products that helps recovery and boosts dynamism
Mélanie Perrin

The method applied by Sens&Vie is based on the latest discoveries in the functioning of the brain that stems from neurosciences. They have helped in enabling a considerable leap in the understanding of our reactions and the management of human behaviour. They offer concrete tools that allow each and every one to adapt to complex, unknown, and especially stress situations by teaching how to mobilize the resources of the brain most notably those of the prefrontal cortex.

The programmes are led by multidisciplinary team composed of specialists, doctors and therapists who all work in synergy in our technical plateau based in Paris in the 8th arrondissement as well as in Geneva through a partnership with the firm Efficium.

Next Finance , April 2012

Article also available in : English EN | français FR

Footnotes

[1] For confidentiality reasons the name has been changed

Read also

May 2011

Profile Job market: Private Banking and Wealth Management

How to build, manage and retain staff? What are the evaluation criteria for good wealth managers ? What are the market’s compensation levels ? Specialised recruitment company, Norman Alex, shares with us their analysis and (...)

Share
Send by email Email
Viadeo Viadeo

Focus

News Institutional investor appetite is back for quant funds

The recent CTA performances encourage institutional investors to more closely monitor this type of hedge fund. Thus, according to Preqin, 52% of them wish to increase their exposure to this type of alternative strategy this year (vs 14% last (...)

© Next Finance 2006 - 2020 - All rights reserved