Online Trading – The Double-Edged Sword

December 17, 2009

Online trading is a double-edged sword. Real-time quotes, news web sites, CNBC talking heads, chat room message boards, and real-time stock sites feeding us up-to-the-minute analysis and commentary¡ªall provide what we need to trade effectively.

Yet, this same nowness of data also makes for more anxiety, fear, and potential negative thinking when things turn against us.

Even when it’s smooth sailing and the market is doing well, the advantage offered by everything being real time makes for a quality of immediacy and urgency that can be disconcerting. This immediacy can be exciting and keeps us on the edge. But it may just as easily turn into anxiety if we fall off that edge and feel only urgency.

Stepping into the Trading Room
For a period of months, I periodically spent a number of hours per day in a day trading firm for individual traders. My interest was strictly to learn something about the scene.

I didn’t go in thinking I would open an account and become a day trader. And, it didn’t take long before realizing that the scene was just too frantic and risky for me. So, it was with my psychologist’s hat on that I entered the trading floor, not a trader’s hat.

I hoped to get a sense of what kind of people became traders and how they approached their work. I also wanted to learn about how the superfast hardware and software worked, including Level II quotes. I needed to learn “trader speak,” the lingo of the profession. And, lastly, I wanted to find out what personality traits might typify various traders who I would observe and chat with.

I noticed that even when traders were doing well with their trades, the market was moving, and they had plenty of momentum to trade on, I rarely got the sense they were enjoying the action. Instead, many seemed anxious, tense, and unable to sit still in front of their computers. They had nervous habits, like biting their fingernails, kicking their legs rapidly under the table. I noticed a lot of squirming in chairs and too many cups of coffee.

Feeling nervous and agitated is not so surprising. Having large amounts of money on the line, needing to pay very close attention to each change in the quotes, and needing to make quick decisions as to when to pull the trigger would make anyone nervous.
Add to this the fact that some traders are drinking numerous cups of coffee and eating sugary donuts beginning before the market opens and continuing through the trading day. This jacks them up even further. It makes for a tense and intense scene. Its not an easy-going work environment.

And how could it be? Unlike the chips in Las Vegas that allow seasoned gamblers to “forget” that they are playing for real money, having your profit or loss continually flashing before your eyes never lets you forget what is at stake.