Online Extra: Off the Floor, Onto the Couch
Since traders have replaced investment bankers and research analysts as Wall Street's rock stars, you might expect them to feel like they're on top of the world. But from where clinical psychologist Alden M. Cass sits in a black leather chair on the 10th floor of a luxury high-rise in midtown Manhattan, that's not the case.
In the last two years, traders who work at hedge funds or trade with banks' capital have inundated his office. Of the so-called proprietary traders at banks, "many suffer from behavioral paralysis," says Cass, who is president and chief consultant at Catalyst Strategies Group. In other words, they're stressed out.
Cass, 30, has built a business out of coaching traders through their anxiety. He starts by trying to make them feel comfortable with him, emulating their wardrobe (power blue-striped shirts, cuff links) and tonsorial preferences (lots of hair gel). The walls of his office are covered with prints of Wassily Kandinsky paintings and a poster from the movie Wall Street.
One of the biggest issues traders wrestle with is a mixed message from their employers. Banks tell them to take big risks -- but not to do anything, you know, risky. Many traders worry that "the people above them are going to come down on them," says Cass. When some make a bad bet, they just freeze, like deer in the headlights.
Consider the case of a trader Cass calls Scared Stiff. After working as a proprietary trader for a few years, Scared had become more afraid of losing money than of not making it. He was trading from a position of fear. Cass advised Scared to stay focused and do his research. Remember, Cass wrote in an e-mail message to Scared, good traders must be willing to risk losing a lot to make a lot. "If you cannot or will not make this investment, you will stress yourself out, pull out of trades prematurely, and bring home peanuts at the end of your trading day."
Cass aims to get through to traders by translating his clinical psychology into trader-speak. For example, he works with them to develop "bullish thinking" even after their trades have failed. He also helps them with "life portfolio management" -- methods to keep traders from behaving like what Cass calls "icemen" at home. "I give them assignments and tasks sometimes, like to take their wives out to dinner," Cass says.
But Cass says that most of his work involves making traders face reality when they're overcome by emotions. He talks them through their trading strategies that are not working, and asks them to recall the last time they pulled themselves out of similar ruts. "I ask them if there's any reason they can't do that again this time," Cass says.
Though the questions seem simple, Cass says getting traders to listen to them is not. Many of the best traders like to be in control and don't have many people in their lives who tell them that they're wrong. Plus, most of Cass's clients are sent to him by their wives. As a result, "the first session is always a doozy," Cass says. "Traders size you up and assess if you're any good," Cass says. If you cut it with them, and Cass usually does, "they'll dump their lives on you." And pay you anywhere between $250 and $350 an hour.