The disaster in subprime mortgages, the recent financial crisis and the numerous hedge funds that have been out of business show us that the markets are continuously changing and are highly volatile and unpredictable. Few professions have to deal with such routine exposure to uncertainty and risk and traders are part of them: they experience stress in their daily life.
Sincethe 20th century, many definitions and theories emerged about stress (Cooper and Dewe, 2004). In order to have a better understanding about the term “stress” nowadays, it can be defined from an organizational behavior outlook as “a person’s adaptive response to a stimulus that places excessive psychological or physical demands on him or her” (Moorhead and Griffin, 2010).
The Institute for SocialResearch model highlights researches and enquiries at the work place and points out that stress is a multistage process (Jex and Beehr, 1991). The stress process has been extensively analyzed before by Dr. Hans Selye (1956) with its pioneering work on General Adaptation Syndrome where he identifies three stages of response to a stressor: alarm, resistance, and exhaustion. He analyzes stress morefrom a physiological and biological perspective than from a psychological one (Martin, 1984).
Applied to traders – an operator market in speculation (Vernimenn et al. 2010), the Efficient Market Hypothesis theory (Fama, 1993) stipulates that traders only take rational decisions and reject all kind of emotions. However, given certain stock market anomalies, a new theory combining emotion andrationality has emerged (Lo and Repin, 2002) called the Adaptive Market Hypothesis. Consequently the decision making process of traders is affected by various emotions such as stress. This idea on emotional aspects in trading was confirmed and extended by Lo et al. in 2005.
Trading stress has recently been more studied consequently to the financial crisis which has shown further causes andconsequences of stress developing past theories to the current stress trading issue. Thus, it has encouraged authors and managers to cope with traders’ stress and master it.
Explaining the causes of stress in the trader’s world is not really easy; this world is a kind of mystery and little research has been made on this topic. Everybody imagines the traders as self-confident rich men. But, the reality oftrading-floor is completely different and traders are also affected by the new work-pathology like stress.
Stress causes imply professional and personal factors. Because there are many personal stressors and it depends on each individual, we decided to focus our literature review on stress professional aspects in the workplace. In that way, Leka S. et al (2004) (where Leka is an AssociateProfessor in Occupational Health Psychology at the Institute of Work, Health and Organisations who makes research in work-related stress)identify nine factors of work stress such as job content, working hours, work overload, interpersonal relationship or organizational culture. Even if the biological response to stress is similar for people (shortness of breath, palpitation…), symptoms and intensityare different because it depends on the traders’ personality (Kiev, 2007). In fact, Kiev, a famous psychiatrist and trading coach specialized in stress management, recognizes five personality types of traders depending on their resistance to stress.
At the same time, Larsonneur (2008), a professor in neuro-linguistic programming, adds another cause to stress. In a trader decision-making, heidentifies four steps: data collection, analyze, feelings and decision. At the second stage, the analyzing process (before the stress appears) also determines the intensity of stress depending on the experience and skills of the trader. In fact, the more competent he is, the less affected by fear or doubt he is. By consequence, stress can be the result of a lack of competences.
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