http://www.arikiev.com/ariblog/index.php Copyright 2010, Ari Kiev Ari Kiev en-US SPHPBLOG 0.5.1 http://www.arikiev.com/ariblog/index.php?entry=entry090627-145603 One of the easiest mistakes any trader can make is not a 'trading' mistake at all. Rather, the mistake is complacency with his or her trading skills and knowledge. Unfortunately, trading is not like riding a bike - you can (and will) forget how. Obviously you'll always know how to enter orders, but the efficiency and accuracy of your trading will diminish without constant renewal of your trading mindset.Read the article]]> http://www.arikiev.com/ariblog/index.php?entry=entry090627-145603 Ari Kiev Sat, 27 Jun 2009 19:56:03 GMT http://www.arikiev.com/ariblog/index.php?entry=entry090624-205403
After the stock market's shocking collapse, investors understandably are looking for alternative avenues. But it's only a matter of time before the wreckage clears and many people again point the wheel down Wall Street.

The real challenge then will be steering clear of investing mistakes that previously caused a spinout. Read the article here]]> http://www.arikiev.com/ariblog/index.php?entry=entry090624-205403 Ari Kiev Thu, 25 Jun 2009 01:54:03 GMT http://www.arikiev.com/ariblog/index.php?entry=entry090528-144000
SAN FRANCISCO (MarketWatch) -- After the stock market's shocking collapse, investors understandably are looking for alternative avenues. But it's only a matter of time before the wreckage clears and many people again point the wheel down Wall Street.

The real challenge then will be steering clear of investing mistakes that previously caused a spinout. Read the article]]> http://www.arikiev.com/ariblog/index.php?entry=entry090528-144000 Ari Kiev Thu, 28 May 2009 19:40:00 GMT http://www.arikiev.com/ariblog/index.php?entry=entry090528-143458
“Because most hedge funds are compensated for annual performance, it rewards managers for taking risks that are based on an annual horizon,” says Dr Richard Peterson of MarketPsych Partners. This pressures managers to meet performance benchmarks by a deadline in order to receive their reward. The potential for outsized rewards activates the rewards center in the brain, and can chemically shut down the brain’s risk aversion center and lead to managers making riskier trades.

Conversely, managers sometimes hold on to losing trades for too long because “the pain of loss is higher than the pleasure of a gain,” says Peterson. In “loss” frame of mind, managers often double own, and cut winners to fund losers; in extreme cases rogue traders such as Jerome Kerviel (Societe Generale) do not immediately confess to their losses for fear of losing their jobs, but instead20go to great lengths to hide their losses from others, and take excess risk in hopes of making it back.

“Most often rogue traders fail [to make their losses back]. If they get bailed out it reinforces their dishonest behavior. Hence any ethical breach in the record is alarming,” says Dr Peterson.
Peterson observes that hedge fund traders who take excessive risk, operate with an ethical dilemma in mind. “They are working with an implied put option which means that they are extremely well compensated if they take large risks that payoff but a catastrophe loss is unlikely to affect them beyond the current year…The worst that can happen to them personally, especially in a hedge fund, is that they lose their job, their current income and any forthcoming annual bonus. In the case of Brian Hunter, he made $75 million in 2005 and beyond the one-third of his bonus that he had invested in Amaranth, he will emerge from the debacle with tens of millions in the bank from his trading in 2004 and 2005.”

Peterson cautions that many traders miss the lesson of these high profile downfalls. “Risk management is key, yet it is often boring and restricts profitability. Firms that are trapped in a death spiral will often take far more risk to get out of their hole. Often, doubling down works and then an addiction to risk can become entrenched.”

What about top managers who perform consistently year after year? Not only can they control their losses, but over time, they made the most money because they knew when to add to winning positions, says Dr Ari Kiev of Kiev Consulting. Good managers need to take enough risk, and know when to take large enough positions to make their winning trades more profitable. Kiev worked with Steven A Cohn at SAC Capital for 16 years as an in-house trading coach.

Good managers also know how to manage stress. Keeping a trading diary of prices, one’s thought process, and emotional response is one way to find out what are some stress triggers, says Dr Kiev. To manage stress, one can practice techniques such as sports, meditation or music to help one to relax, focus on reviewing one’s trades, and plan different ways of responding to events.

Personality tests such as the Caliper are useful when applied to finding out how people make their decisions. Good traders are self-aware, open to learn, and are resilient to losses. “Managers need to set goals, find out how they can improve, and take on more challenges,” says Dr Kiev. After all success does not happen overnight, it takes hard work and practice to achieve it.
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]]> http://www.arikiev.com/ariblog/index.php?entry=entry090528-143458 Ari Kiev Thu, 28 May 2009 19:34:58 GMT http://www.arikiev.com/ariblog/index.php?entry=entry090511-123555 www.bottomlinewealth.com

Just when it seems that the economy and the financial markets have punished us enough, the torture continues- stock market relapses…disintegrating automakers…rising credit card fees… even more multibillion-dollar Ponzi schemes. All the ingredients for unrelenting financial stress.

For advice, I turned to Ari Kiev, MD, a psychiatrist, consultant and author of books, including Mastering Trading Stress, who counsels Wall Street traders on dealing with investment anxiety. He explained that most of us cope with intense fear by pretending it doesn’t exist, but such avoidance actually makes the fear grow.

What to do instead: First, acknowledge that you are scared and that you made some mistakes. Allow yourself to experience panic. This feels very uncomfortable at first- but then something surprising happens. You’ll find that even the most negative feelings aren’t so intimidating because they dissipate rapidly, usually in a matter or minutes or, at most, hours.

When drafting your investment strategy, swing for singles that will slowly improve your score, not home runs that you are much less likely to achieve. Don’t pretend that you can completely repair your portfolio overnight. At best, it’s going to take several years to make back what you have lost.

Finally Kiev says that listening to the experiences of others in similar circumstances can help you identify your own self-defeating patterns and change them to more helpful ones. The American Association of Individual Investors has local chapters around the country where small investors meet to discuss their successes, failures, concerns and ideas. Membership cost; $29/year. 800-428-2244, www.aaii.com

]]> http://www.arikiev.com/ariblog/index.php?entry=entry090511-123555 Ari Kiev Mon, 11 May 2009 17:35:55 GMT http://www.arikiev.com/ariblog/index.php?entry=entry090428-104746 Workforce Management Online, March 2009

While Kiev’s work as an in-house psychiatrist has focused on hedge fund management, yet his insights could easily be embraced by executives looking for ways to improve the performance of employees.

For nearly 17 years, Ari Kiev was the in-house psychiatrist for multibillion-dollar hedge fund SAC Capital. While Kiev’s work, including seven books along with one currently in progress, has focused on hedge fund management, his insights could easily be embraced by executives looking for ways to improve the performance of employees. Kiev spoke with Workforce Management staff writer Jeremy Smerd about the lessons he has learned.

Workforce Management:
When you started at SAC you held group sessions to discuss ways people could talk about the psychological challenges they fa ced in their own work. How did you get around that?

Ari Kiev:
You are in a forum where honesty and truth-telling is made into an asset. Admitting vulnerability—some people do, some people resist it. Some people are more open than others. Somebody starts getting open, you acknowledge that and you encourage that. And you set up a rule where nobody is there to comment on what anybody else says. We’re just here to hear about the human experience that we’ve all experienced.

WM:
So what do you tell an employee who is clearly not living up to his potential? How do you get him to change?

Kiev:
First, the trader has to identify the emotion and how it affects him. Keep notes on yourself. Observe your own level of anxiety.

Each person has his own idiosyncratic ways of making decisions in the face of stress.

I talked to a guy the other day who lost a billion dollars. He had various explanations for it and so on, but his problem was he hired people who were less than the best because he couldn’t get the best people for his team because he wasn’t in London. So he was using=2 0a second-tier level of people and he had zero appetite for management. He’s wired to take risks, to analyze problems, to trade. He has little empathy, little patience for communicating and hand-holding. The conclusion is that he probably needs a partner who can manage everybody else. That’s not what you want to do even though you are trying to manage a fund. You are not that kind of leader. Now, that’s not an easy conversation to have because he doesn’t want to give up control.

WM:
What advice can you give to managers who are trying to get the best out of their employees?

Kiev:
There’s no single formula. You are really trying to listen to each individual in terms of their uniqueness and what it is that they are doing that is compatible with producing the kind of results you want.

WM:
What do you tell employees who aren’t adapting to the economy’s new and often unpleasant realities?

Kiev:
You have to be a team player. It’s a natural inclination of human beings to take more risk in situations that arenE2t working than to take risk in situations that are working. So the inclination is to hold on to losers and not to add to winners. Being able to know when to cut, know when to fold—it’s hard to do. One of the toughest things. And one of the first thing people should learn.

WM:
How do you manage morale in a time like this?

Kiev:
One conversation is, let’s compare what’s going on now to the past. And to what extent can you frame [what’s going on now] in terms of being time-limited. So that you know you need to slow down, lower your expectations. Being able to sit on your hands is a virtue that takes many, many years to learn. But that may be what you have to do.

It’s important to encourage people to be more philosophical, to be more patient.

WM:
What tools from psychotherapy do you use?

Kiev:
Listening; reflecting.

WM:
What do you say to a trader who loses $200 million?

Kiev:
I think they want the chance to talk to someone who is not emotional, who is supportive, who has a philosophical view that this too will pass. In talking about it, it neutralizes the sting. It’s not like I have an answer. My answer is more generic. This didn’t work. That’s the nature of the game. This is the life you’ve chosen. Things will get better, they usually do.

WM:
There have been hedge fund managers who have killed themselves. And a guy who lost his job and killed his family. What could employers have done to manage that crisis better?

Kiev:
You have to do a psychological post-mortem and determine what clues people missed. What are the warning signs? What processes can you put in place to recognize who’s hurting and crying for help early on. It’s possible that there are other factors in his life. A supervisor could have been more burdensome, problematic or critical than what was warranted given the psychological vulnerability of the person who ultimately killed himself.
Generally, though, even people who are in treatment and on antidepressants kill themselves. It’s so difficult to predict who is going to do it. More people who lose billions of dollars don’t kill themselves.

WM:
What hav e you learned about managing people?

Kiev:
Patience; tolerance; a sense that it’s very hard to change people. You are better helping people become more familiar with their strengths than focusing on their weaknesses.

The human condition is such that everyone’s trapped by their earliest experiences, by things they’ve learned about the way the world is. That narrows the way they see things. So they keep seeing the same thing over and over again. The process of growth and maturity is being able to step outside that fixed way of seeing the world. There may be a way of being in the world where you are much more present in the moment. That’s what’s exciting about sailing or skiing or trading. You need to take a lot of information as well as your own emotions and try to be as present in the moment as possible without being too distracted by your goal of achieving ‘X’ amount of dollars. While you want to set up a goal and design your portfolio with profit targets in mind, you don’t want to lose your flexibility. It’s kind of a Zen state.

WM:
You were at SAC for 17 years. How did the company change, other than growing to nearly 1,000 employees?

Kiev:
I changed the culture from being individualistic to being much more collaborative. People talk about feelings, talk about goals, talk20about strategies. We have a whole management team now and a huge HR department focused on this. They’ve got more people who are life coaches. People are willing to share information, who are willing to bring other people into meetings. There’s less competition.

HR has introduced performance measures—manager assessments, 360 assessments. There’s a lot of dialogue at the firm about personalities. It’s a much more communicative culture.
]]> http://www.arikiev.com/ariblog/index.php?entry=entry090428-104746 Ari Kiev Tue, 28 Apr 2009 15:47:46 GMT http://www.arikiev.com/ariblog/index.php?entry=entry090413-200857
Book Excerpts
The Hedge Fund Edge
Ari Kiev 03.24.08, 11:38 AM ET

In my previous books on the psychology of trading, I emphasized the importance of going beyond self-limiting notions, developing and committing to public goals, taking risk, centering and turning breakdowns into breakthroughs. In this book, I focus on how you can not only empower yourself but also empower others with these principles--in essence how you can become a successful leader. click here for the article on Forbes.com
]]> http://www.arikiev.com/ariblog/index.php?entry=entry090413-200857 Ari Kiev Tue, 14 Apr 2009 01:08:57 GMT http://www.arikiev.com/ariblog/index.php?entry=entry090413-090346 Lots of people cope with tough times by quaffing a cold beer or two. Drew Weinstein hopes folks will soon reach for one of his.
Mr. Weinstein, who last October lost his job as a research analyst at investment bank Cowen & Co., has said good-bye to Wall Street to take a shot at starting Magellanic Brewery. His plan is to hire other breweries to make his beer, a light lager he describes as “a better Budweiser.” Read the article on Crainsnewyork.com
]]> http://www.arikiev.com/ariblog/index.php?entry=entry090413-090346 Ari Kiev Mon, 13 Apr 2009 14:03:46 GMT http://www.arikiev.com/ariblog/index.php?entry=entry090323-120706 Of DOW JONES NEWSWIRES 20 March 2009
NEW YORK (Dow Jones)--The sudden spikes in stocks such as Citigroup Inc. (C) and American International Group Inc. (AIG) suggest that trader psychology is still a more powerful influence than fundamental analysis on this stock market.

The shock of Lehman Brothers Holdings' failure last September and the subsequent market plunge caused losses that had a traumatic effect on traders and investors. A sustained level of volatility not seen since the 1930s may be a side effect of that trauma.

Losses curb a trader's ability to make rational decisions, leading to erratic buying and selling, according to money managers and a psychiatrist who worked for a major hedge fund. The most destabilizing situation for a trader to be in, they say, is a short position - which is essentially a bet that a stock price will decline - that suddenly turns against them.

Bailing out of those bets can cause spikes such as the quadrupling of Citigroup's stock from 97 cents to its high of $3.89 in the last two weeks; or AIG's move from a low of 33 cents to as much as $2 in less than a week. The stocks jumped even though there wasn't a fundamental improvement in the outlook for the troubled companies.

Losses "lead to trouble making decisions, trouble staying with a strategy; they lead to a lack of confidence and demoralization," says Dr. Ari Kiev, a psychiatrist who recently finished a 16-year stint as the in-house trading coach for Steven Cohen's hedge fund SAC Capital.
"It's not officially post-traumatic stress disorder, but it has some of the same characteristics in the sense of not wanting to face the situation again, [and constantly] thinking about it. People get sick to their stomach and feel like throwing up."

Kiev, who now coaches money managers in his independent practice, said he often counseled traders at SAC who were mentally unsettled and even feeling nauseous because of trades that went against them. Prior to his stint at SAC, he helped Olympic athletes with mental preparation.
In his work, Kiev has noticed that trauma was more common after a losing "short" bet.

Short-selling is tougher on the mind for several reasons. If a trader borrowed and sold Citi stock for $1 apiece - and, according to one Wall Streeter, some traders did so, albeit as part of a hedging strategy - the most he could gain is $1 a share. That would be the case if the stock went to zero and the trader never had to replace it. When the stock hit $3.89 Thursday, the trader was down by $2.89 a share, more than double the original stake.

In theory, losses are unlimited when a stock is sold short. Plus, stocks that are popular with short sellers are prone to "short-covering bounces" or "short squeezes." These happen when people notice a sharp move upward and rush to buy back their bet. In the stampede that follows, stocks can gain value exponentially with the slightest fundamental provocation. Some say that's the case with Citi, AIG and other financial stocks.

When a trade goes bad, the trader often feels compelled to double down again and again, says Lorenzo Di Mattia, manager of hedge fund Sibilla Global Fund. Even a successful trader using stop losses can fall into this trap, Di Mattia said, and he is constantly on guard against what he calls the "snowball effect."

Quincy Krosby, chief investment strategist for Hartford Financial Services, says traders have experienced their own crisis of confidence in recent months, as losses cause them to "question their judgment."
Psychological healing - and thus reduction of volatility - will likely take a while.

-By Rob Curran, Dow Jones Newswires; 201-938-5176; robert.curran@dowjones.com [ 03-20-09 1130ET ]]> http://www.arikiev.com/ariblog/index.php?entry=entry090323-120706 Ari Kiev Mon, 23 Mar 2009 17:07:06 GMT http://www.arikiev.com/ariblog/index.php?entry=entry090323-120457 By Joseph A. Giannone

NEW YORK (Reuters) - Hedge fund managers may want to get their heads examined.

We're not talking Rorschach tests and distant memories of parents. Rather, psychiatrist Ari Kiev has helped hundreds of star traders improve their market performance by increasing concentration, managing stress and being well prepared for bad situations.

Needless to say, Kiev's phone has been ringing off the hook following months of plunging markets, mounting losses and a record wave of hedge fund investors withdrawing their money. read article]]> http://www.arikiev.com/ariblog/index.php?entry=entry090323-120457 Ari Kiev Mon, 23 Mar 2009 17:04:57 GMT