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ATLANTIC INTERNATIONAL UNIVERSITY

Rethinking risk: The impact of motivation and action on uncertainty


Foreign Exchange Market
PhD in Finance Thesis
Jose Gil Sanchez

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Rethinking risk: The impact of motivation and action on
uncertainty Foreign Exchange Market

THE ATLANTIC INTERNATIONAL UNIVERSITY


This thesis has been submitted in fulfilment of the requirements for a
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Rethinking risk: The impact of motivation and action on
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Rethinking risk: The impact of motivation and action on
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Rethinking Reward: The impact of motivation and action on


uncertainty Foreign Exchange Market

B.E. JOSE ANTONIO GIL SANCHEZ, MSF, PhD in Finance

A thesis submitted in fulfillment of the requirements for the degree of


Doctor in Business Administration, in Management

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STATEMENT OF ORIGINALITY

This thesis has been composed by myself and contains no material that has
been accepted for the award of any other degree at any university.
To the best of my knowledge and belief this thesis contains no other
material previously published by any other person except where due
acknowledgment has been made.

Jos Antonio Gil Snchez


June 2015

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TABLE OF CONTENTS

List of Tables

List of Figures

List of Abbreviations

Acknowledgement

Abstract

Chapter One
1.
2.
3.
4.
5.
6.
7.
8.

Introduction
Preamble
Motivations
Aims
Contributions
Importance
Main findings
Outline structure

1
1
1
1
1
1
1
1
1

Chapter Two
Review of the Literature
Introduction
Poner los subtitulos aqui
Chapter Three
Data and Variables
Introduction
Data source

2
2

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Sampling
Variables
Dependent variable
Independent Variables
Measure of model performance
Software
Conclusion

Chapter Three
Conclusions
Summary
Conclusions
Contributions
Limitations and future research
References
Appendices

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ACKNOWLEDGEMENT

I never thought in pursuing a Degree in Doctor of Business Administration


until I discovered the amazing art of trading. After been motivated by
movies and real stories of men who entered the capital markets with only a
dream, and then were famous for its success, I did not hesitated in
following the steps.

I am sure my future as a Laureate Doctorate is

continue contributing to the behavioral economics field by researching not


only in behavioral trading, but also in any field where my skill set could be
used for social changes and measurements. I want to thank all the people
that were there, supporting my in the process of this Doctoral Thesis, and
made it true, with me.
Among them I want to congratulate, without hesitating, all ths Atlantic
International University Staff, because they were the team who directly
impacted the way of thinking, and guided me towards starting and
completing this thesis until it success. I really admire all the work they put
in every student, and I did not want to hesitate in now being thankful for
this work. Their advice was always on time and helpful, on every step of
this Doctorate. I feel very lucky to had them as my supervisors all time, on
time.
My parents, as my eternal coaches and supervisors were very helpful in all
the process of this Doctorate. I shall dedicate this achievement in their
honor. I will never be able to pay them back what they have done for me.
Also, all my relatives who knew the process of this Doctorate and research,
and how they encouraged me to never stop it, until I finished.

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Also, this title and this research is being done in honor to all the teachers,
mentors, and people who gave me advice during my life, not only in AIU,
but also in Rochester Institute of Technology, where I took my Master in
Science in Finance, in Rochester, New York, United States of America, and
in the University where I pursued my Bachelors in Industrial Engineering,
Pontificia Universidad Madre y Maestra, in Santo Domingo, Dominican
Republic, and in my school, my Church, and my friends, they have helped
shaping the knowledge I have today. Because it is true, your mind, attitude
and culture will be shaped by those you always see, watch and hear.

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ABSTRACT

For the decade of 1970, several studies were developed in order to establish
the correlation between extrinsic and intrinsic rewards, and how those
rewards could control the behavior of humans. In almost all the researches,
the conclusion was that reward generally increase the likelihood to modify
behavior, and that this modified behavior would be used always, when a
reward is in stake. In some of the researches (Skinner, 1953) in fact, when
the reward was terminated, also the behavior that generated that reward
was terminated, too. This finding led to a wide range of reward and
motivation speculation and real theory about the topic. Regardless of this
general finding, researchers wanted to develop more accurate findings, to
increase profitability in human capital, psychology and any other area
where human decision is important, i.e., economics, forming the branch of
economics called behavioral economics and directly contributing with
mathematics with the game theory aspect.
Also, we discuss how humans react to multiple choices and multiple
parameters given in any single chance of selection. In fact, if you want
your customers to select something, charge for it, also, if you want them to
do something, do not put them in the perspective to have a lot of options,
but give them fewer options. Moreover, if you want to induce someone to
any particular action, you have to think in the incentives, the defaults
options, and also the labels. For this work, we review the empirical and
theoretical findings on the impacts of external and internal incentives in
foreign exchange trading, and how motivation can induce a higher level of
activity, increasing the level of the incentives received.

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It is very common for parents, teachers, business managers and even the
Government, to promote higher efficiency in external motivators (i.e.
giving a prize for those who score higher grade than 80%, or a bonus from
the Government for those who achieve higher literacy and grades in the
High School).

Eisenberger, Pierce and Cameron (1999) explain how

intrinsic motivation depend on the performance requirements of the people


who are working on, and also that reward for exceeding others always
carried out self-reported interest.
In any coaching sessions, the coach will always try to encourage with an
active learning environment, fix the problems the arise, and remind
everyone to focus in the big picture. And the motivation crowding effect
explains that external interventation via monetary incentives may
undermine the intrinsic motivation.
Thaler and De Bondt (1995) found a great phrase to explain how
motivation can overcome and how self-confidence may react: Perhaps
the most robust finding in the psychology of judgment is that people are
overconfident. Given the importance of the motivation in creating external
and internal value addiction in the trading room, this research paper is
based in discovering, how motivation can create value in the trading room.
More precisely, we show that rational traders may decide to keep coaching
as an external agent of motivation. This attitude, on average, leads to a
higher level of investment, and therefore higher level of success and
failure.

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CHAPTER ONE
INTRODUCTION

1.1 PREAMBLE

The theoretical framework of behavioral economics is very important to


introduce to the credit risk management necessary towards recognizing
indicators in financial traders distress, in order to prevent losses, to
motivate them to improve gains, and to stay focused, at the same time that
motivated, preventing all the potential losses they may incur.

The

motivation has been studied as an important variable in the selection of


choices, the skills developed, and the chances increased in order to prevent
something from happening, or to increase productivity in the trading room.
In the early 70s several studies were been published to explain how
rewards can control behavior (Skinner, 1953), was the first researcher in
express a correlation between the behavior and closely tie this with
extrinsic rewards, explaining that a change in the behavior would persist as
long as the individual receives a reward for this change.
Also, we present a relation with the evidence that correlates the failure of a
new business with non experience (Lovallo and Camerer, 1999). They
explain what they call, hit and run strategy where profitable entries in the
short period lead to long term non profitable exits. Also the theory that
businesses success have low probability with high return events. In fact,
they argued that firms could make mistakes very often. Regardless that
firm and trader are very different, we can imply from this experiments how

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traders, with motivation, can enter in the market, making mistakes very
often. The reason, these researches have found, and what is most important
for our research, is that individuals commonly tend to overestimate their
capacity to succeed.
Motivatoin in the trading room has captured the attention of economists
since behavioral economics explains how motivation, feelings and
emotional facts change the direction of the market of any given
commodity. In our view, in the same page, we, as scholars, challenge with
a task of a new risk definition, and how motivation can help traders not
only to increase profits, but also to stay focused in intrinsic and extrinsic
motivators and prizes for their concentration and accuracy to find good
trades.
This work proposes a different approach to the solution to a common
question: Does regulated extrinsic motivation provides a better estimation
of the market, so traders can better take into account the entry mistakes,
and increase profits from speculation in the markets?
Giving the importance of this questions, and to better understand the
performance of the markets, it is very surprising to understand that scholars
have not addressed the questions that correlates motivation, confidence (not
overconfidence) and success in the markets. In our view, the explanation is
simple: assuming that extrinsic and guided motivation provides an
explanation to increase the concentration in analyzing the markets with
technical analysis, the amount of mistakes taken into account are only those
trades that end up failing.
Also, we incur into the recipe what scholars have called, immediate
gratification, and how this can accelerate motivation. We understand how
optimistic can trders may become if they have a good amount of winning

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trades, and for this, we continue coaching in order to keep the trader
focused in the long term prize. On the one hand, it is usual not to have a
100% profitability trades. In the other hand, excess in motivation, and
inconsistent preferences or information, may lead to unsatisfactory results,
this is, decreasing the account margin, and losing a higher amount of
trades. For last, the trader, without motivation, could create an unnecessary
condition for ignorance, procrastination and the desire not to invest.
We want to stress that the logic behind the results and the experiments are
new. According to the usual view, overconfidence or intrinsic optimism
pushes the individuals to become entrepreneurs, to be eagers in investing
and to possibly make some mistakes. This is the explanation for Keynes,
for example, who argue that optimism is necessary for creating and
developing any business activity.

The paper shows how regulated

motivation can lead to an increased performance in the trading room. Also,


this case explains how coaching is held in order to keep the trader focused
in the long term goals, and not to procrastinate or to lose focus in the short
run.

In summary, the aim of this research is to use coaching as a motivation and


guided tool in order to create a state of mind of the trader, to analyze
predictive trades and to improve the outcome of the trades taken, in the
foreign exchange market.

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1.2 MOTIVATION

Previous research have tried to investigate the relationship between


motivation and financial success, coaching and sports efficiency.

For

example, in the paper The Lure of Authority: Motivation and incentive


effects on power, Fehr, Herz and Wilkening explain that authority has
important motivational consequences in order to delegate choices. But,
more important investigations towards incentives and motivation explain
that in general term, individual investors underperform the standard
benchmarks, making choices irrational as selling winning investments and
buying underperformed trades.

Furthermore, the lack of an adequate

motivation limits the attention of the investor. Thus, their decisions of


purchasing or selling are led also by emotions, which stop them from
thinking rationally and holding an outperforming portfolio.

These

behaviors obviously deleteriously affect the financial performance of the


individual investor or trader.
All the theoretical framework of economics have been built under the
assumption that human being is always a rational agent. In the book
Principle of Economics, D. Mankiw explains in the Principle No.2 that
Humans are rational individuals, but sometimes take marginal decisions.
This means that we, as human beings, always try to maximize wealth,
while minimize risk. All the models that have derived from the theory and
these assumptions have provided to the scholars and economists a great
overview of how financial markets work.
Empirical researchers have found that investors rarely act as the models
suggests.

Thus, this empirical research explains that most individual

investors hold under diversified portfolios and that they trade actively, and

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into their detriment.

The disposition effect is called when investors

(traders) tend to sell winning trades while holding on more on their losing
ones.
We also know that investors tend to fall in love with certain currencies,
when trading in the foreign exchange market, and they get in love
sometimes with currencies that maybe they deep inside know will not have
a good clear strategy and direction. This behavior is not technical nor
fundamental, and is arguably to expose them to unnecessarily high levels of
idiosyncratic risk.
Also, the behavior of real traders is influenced by the media. Traders tend
to buy more often when the media and the news give future opportunities
of trading rather than fundamental and objective news and information
about a country, and this speculation often has the potential to influence the
price action of the value of any pair of currencies.
Benabou and Tirole (1998) analyze and discuss how rational agents place
value with confidence, and how people utilize strategies in order to pursuit.
Also, they explain that confidence in ones abilities generally enhances
motivation, making it a valuable asset for individuals with imperfect
willpower. There are several premises in the theory of motivation. The
first premise in the theory of motivation explains that people usually have
imperfect knowledge of their own abilities, and they generally are ignorant
in the cost of their actions. The second premise in theory of motivation is
that the ability and effort in any performance complements, making the
person to act with motivation.
Inspired by the previous literature, we understand it is very necessary to
bridge these gaps, investigate how motivation and coaching can decrease

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the probability of financial distress, and also how this motivation and
coaching can increase the winning trades.

1.3 AIMS
By understanding the gaps and the absence in the literature above, this
thesis has major aims and objectives to achieve. These are:
1) To estimate the correlation between extrinsic motivation (coaching)
and successful trades (investments).
2) To estimate the probability of success of a trading strategy with the
proper coaching in a trader.
3) To estimate the probability of success of a trading strategy without
the proper coaching in a trader.
4) To measure what are the possible consequences of self-motivation
and intrinsic motivation.
5) To establish the relationship between extrinsic motivation and
incentives through determination, patience and hard- work.

1.4 CONTRIBUTIONS
This thesis makes different contributions to knowledge. First, it shows a
model to use in order to achieve higher proficiency and probability of
success in Trading, when speculating. This model express what we need to
achieve as traders in order to become better traders, with self-confidence,
but also without more self-confidence than desired. Efficiency then will be
a variable will be studying, since efficiency measures the ability to achieve
a better outcome by adjusting the predictive model.

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Also, this research papers identify that extrinsic motivation through


regulated coaching, can indeed contribute to a higher outcome in
profitability in the trading room, while trading the different goods.
Third, it explains that sometimes self-confidence can blur the mind and the
process of the trader by selecting the best trades, the ones that provides
higher income, but also the ones that provides higher risk, and that
coaching can interfere in the process of the market and the trader by giving
the trader another sigh, another eyes to develop a broader view, and then
select the best trades.

1.5 IMPORTANCE

Owners and Managers


Companies are owned by directors and shareholders.

Both have in

common many different strategies in order to prevent losses, invest in


profitable business plans, or invest in those business plans that are in
action. Regardless of the type, owner or manager, both need to know that
coaching is a good strategy in order to increase the probability of profitable
investments.

Policy makers and regulators


Governments obviously do not want to see any crisis damage between
banks and investors. For this reason, regulators and policy makers must

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closely understand how trading could be improved in any financial market


with extrinsic motivation and coaching.

Banks, Trading Institutions and Speculators


Banks, Trading Institutions (Mutual Funds and Hedge Funds), and
Individuals investors, speculators and traders, must understand the impact
of extrinsic motivation through coaching in order to succeed, not to fail.
This possible growth and success is the role and the main mission of this
parties managers.

Researchers
Other researchers who are involved in the field of behavioral finance,
psychology and economics must consider the methods and results of this
research and possible extend it in various different directions.

1.6 MAIN FINDINGS


We have analyzed the value placed by rational agents, defined as traders, in
the trading room and any given trading environment, but defined
specifically in the Foreign Exchange Market, in the strategies developed
and employed, with the proper coaching of a Certified Master Coach, in
order to pursuit excellence in trading. We have discovered that confidence
in ones abilities generally enhances motivation, making it a great asset tool
for individuals (forex traders) with imperfect willpower, to control
outcomes in speculative (sentimental, technical or fundamental analysis)

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trading. We develop a model of motivation, coaching and expertise in


foreign exchange market trading, where we can track the motivation, the
coaching, the human cognition, with the results in the foreign exchange
market activity. We have discovered also, with the researchs done before
this investigation, self-confidence can lead to devastating results, if not
controlled.
The empirical results of the model show that lower efficiency in foreign
exchange trading is associated with the higher probability of selfconfidence, not guided, lack of knowledge, lack of self-esteem and
financial stress for disobeying the rules established with oneself. Pure
Technical analysis has proved to be profitable in any market activity. We
also find that among these types of self.-confidence, we find some that are
negative for the profitability of the strategy.
In the past we have found researchs, like Manove and Padilla (1997) or
Heaton (1997) have found how motivation and optimism results in higher
performance in borrowers that go to the bank. We are making a similar
research but not with borrowing, but with trading, and the results, guided
with a Coach, are similar.
Because psychologists have understand that, over the years, there are two
types of motivation, this paper focuses on trading activities in the foreign
exchange market that goes with a combination of intrinsic motivation and
extrinsic motivation. The results are similar, both, if guided properly,
contribute to developing higher returns of the original investment made in
the foreign exchange market.
The coach usually coaches 30 minutes a day, with activities involving the
coach and the coachee. These activities enables the mind of the coachee, in
this case, the trader, to properly understand the pros and cons of self-

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confidence, and how to discover the mind by reacting properly to each


decision. The first meetings between both were held in order to teach
about: Knowledge in the area of trading the foreign exchange market, and
also defining realistic goals, external and internal stimulation, amotivation,
external regulations, and identified regulation.
In the results we can compare that, without coaching, the average win trade
is about 25%, and the average losing trades are 75%. In the other hand, we
can see that 45% win are those done with proper coaching, with only 55%
of the trades lost. But this is not the most important fact we will explain
and discuss. Since the amount of trades won do not define the percentage
of success of the trade, we then analyze that in any given trade, with proper
coaching and motivation, the trader makes 30 pips more when compared
when not trading properly with confidence, knowledge and other skills
needed, as the sixth instinct or the trader instinct.

1.7 OUTLINE OF STRUCTURE


This chapter is an evaluative chapter giving an overview of this thesis and
the contribution it makes. This thesis is generally made up with two
separate projects which each employs different data samples. These are
discussed in details in Chapter Four and Five. The remaining parts are
outlined below.
Chapter Two is the complete literature on motivation, coaching, risk
management and trading. It begins with a brief discussion of the definition,
types and characteristics of motivation. We include literature with the
results of motivation in different types of work, entrepreneurship and
projects.

We also define how coaching help in sports, and how

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determination in acquiring knowledge and skills are important in order to


succeed in any project and duty. We include statistical methods used in
different projects, majorly in sports, on how coaching and motivation has
helped athletes in performing higher than average, and how selfmotivation, with recent findings in correlating tweets with performance in
NBA players, for example, are important in determining the outcome of the
game, this is, the prediction of the game. In Chapter two we also explain
how they have develop these variables used, how they came with the
results and how important are those results for our thesis and own research.
Chapter Three describes the data used in this research. As the research
focuses on Foreign Exchange Trading, the data source is in general, the
software we used to watch the data feed of Foreign Exchange Pairs, and the
decisions and trades taken, and analyzed.

Chapter Six is the concluding part of the thesis. The objectives of the
whole thesis are reviewed and the findings summarized. Some conclusions
are given with policy implications. The limitations in this research are also
mentioned and future work is suggested.

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CHAPTER TWO
REVIEW OF THE LITERATURE

2.1 INTRODUCTION

This chapter will comprehensively review the literature covering the


development of motivation, coaching and trading. It includes the definition
of motivation, the types of motivation and which experiments have been
done showing how motivation can enhance productivity. Also, we define
comprehensively coaching, and how coaching has been tested in sports and
other areas of human social life, with the objective of increasing
productivity; we also describe the types of coaching. For last, and not
least, we explain how the trading world works, and how strategies are
developed in the microstructure of the foreign exchange market.

2.1 MOTIVATION

By 1971 it has been regarded that extrinsic rewards could control behavior
(Skinner, 1953). Skinner, in his studies, showed how extrinsic rewards
could control behavior, and explained that rewards are found to increased
the likelihood of the behavior, that is emitted again, while the reward
persists.

Also, he analyzed that when rewards finished, the behavior

eventually finishes, too. This behavior-change program is applied today in


a variety of settings and fields. Deci (1971) discovered that tangible

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rewards could undermine and change college students intrinsic motivation


for any activity. Also, years later in 1971 Zeevi, Kruglanski and Friedman
confirmed the findings.
But these were just the first and most important studies we can recall about
intrinsic and extrinsic motivation and rewards.

Several studies have

focused on the external events on intrinsic motivation, with tangible


extrinsic motivation, others have seen that verbal rewards, competition and
choice are part of this intrinsic motivation.
The Cognitive Evaluation Theory, CET, express that intrinsic motivation is
the psychological need for autonomy and competence, so the effects on
these rewards depend on how it affects the self- determination and
perceived competence.
Interpersonal contexts are referred to homes, classrooms, or work groups
that influence peoples experience of autonomy and relatedness (Deci &
Ryan, 1995). This is, how people are constricted to think, act and do
according to their specific and unique context.

Ryan (1983)

two

experiments were made where in one group the rewards were administered
in a relatively controlled manner, and the other group in which they were
the ones administering in a relatively non controlling manner.

As

predicted, the controlling administration led to undermining the intrinsic


motivation relative to the other group. This experiment is important to
define how groups can undermine or motivate ones abilities and
motivations to work.
The term verbal reward is not typically used in the intrinsic motivation
literature, because the term positive feedback is more common to be seen
instead. This type of reward is predicted to enhance intrinsic motivation.
the studies have shown that feedback leads to less intrinsic motivation than

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positive feedback. The phrase excellent, you should keep up the good
work is viewed as a pressure to continue the well performed action. The
verbal feedback compared to others, you have done very well has not be
seen as a positive feedback, rather than informational feedback, and thus,
less intrinsic motivation that did the other.
Some researchers in behavior as Scott (1975) have explained that the
concept of intrinsic motivation is so obscure that is not useful and positive,
since there is no evidence of intrinsic motivation. Other researchers have
claimed that intrinsic motivation can be explained by operant principles
(Carton, 1996). Dickinson (1989) has shown there are cultural values and
reinforced by general praise.
Decis work is primarily based on that the completion of an intrinsically
interesting task is the result of the participants and the effort put into that
task. Extrinsic motivations is nothing else than external rewards, most of
them associated with the price system, and the value someone gets when
doing something. Intrinsic motivation, hence, or behavioral motivation, as
Frey refer too, comes from within, and as we have stated, some
behaviorists understands since it cannot be precisely described, it cannot
exist in theory. Hence, the more we are motivated, the more effort we will
put into a task. But research has also show that these two not necessarily
go together.
The work of motivation was initiated in 1930s with Tolman and Lewin.
They believed that the behaviors would lead to desired outcomes, Tolman
(1932) and Lewin (1936).

So, researchers started finding peoples

expectations about attaining goals, Abramson (1978), and the set of actions
that kept people moving toward selected goals (Carver & Scheier, 1998).

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More recent work have started to distinguished that there are different types
of goals and outcomes. There are ability-development goals, or abilitydemonstration goals, (Dweck, 1986, Nichols, 1984). These studies have
suggested that the different types of goals lead to different types of
outcomes and consequences.
The rise of researches in spontaneous activities of drive reduction gave the
recognition to intrinsic motivation, while the second tradition is more
focused on needs stems from the work (Murray 1938). A need is a
construct, a convenient fiction or hypothetical concept, that stands for a
force, the psysico-chemical nature of which is unknown, in the brain
region, a force that organizes perception, apperception, intellection,
conation, and action in such a way as to transform in a certain direction an
existing, unsatisfying situation Murray. Both definition of intrinsic and
extrinsic motivation recognize that motivation leads to action; and that
those motives are a reflection of ambient social values and their
transmission.
We consider the needs to be innate to ourselves, rather than learned and be
chosen from outside perception and stimuli. Must of the actions are driven
to satisfy the most basic needs. When lonely, people may seek companion,
when controlled, people may explicitly seek autonomy, among others. But
when they feel ineffective, they tend to behave to satisfy the needs, by
doing interesting things.
McClelland (1965) discovered, with other empirical personality theorists,
that needs are learned, and that differences in need strength is the basis for
predictive behavior. Atkinson (1958), and Winter (1973), have addressed
different levels of achievement motivation and the outcomes that result
from the need strengths.

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In the 1970s a few investigators explored the concept of intrinsic


motivation, as Deci (1971), Lepper, Greene & Nisbett (1973). Among
others, they understood that intrinsically motivated activities were defined
as those that individuals found interesting and would do in the absence of
operationally separable consequences Deci & Ryan (2000). White (1959)
expressed that sometimes people do activities just for fun, for feeling
engaged in efficacy or competence.

Thus, Deci (1975) defined that

intrinsically motivated people are those people with behaviors to feel


competent and self determined.

In other investigations, Hull (1943)

understand that all acquired behaviors derive from satisfaction of basic


psychological needs.
The postulate of intrinsic motivation begins with: it states that humans
are naturally active and that there are natural tendencies toward
development that require nutriments to function effectively. In particular,
intrinsic motivation concerns active engagement with tasks that people find
interesting and that, in turn, promote growth. Berlyne (1971) called this,
collative stimulus properties. Deci also explain that the active engagement,
the fulfillment of the activities realized represent an ongoing commitment.
Thus, the experiences of competence and autonomy are important for
intrinsic motivation and interest in utility and value acquired.
When discussing about psychological meaning of intrinsic motivation and
the relationship with extrinsic rewards, Deci (1975) suggests that intrinsic
motivated people behave and move with activities that they tend to do
naturally and spontaneously, without such self interest.

In later

experiments made during 3 decades, Deci, Koestner & Ruan, 1999a)


explain that not only monetary rewards, but also all types of tangible
rewards significantly undermined intrinsic motivation.

Deci & Cascio

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(1972), and other researchers found that surveillance, evaluation and


threats. Also, Deci and Ryan (1980) tied perceived locus of causality,
called PLOC, to peoples need to feel autonomous, suggesting that
contextual events affect intrinsic motivation and the quality of functioning
because they influence the extent to which people experience autonomy
while engaged in an activity Deci and Ryan (1980).
The conclusion with these researches

have found that motivational

strategies such as rewards and threats undermine autonomy and lead to non
optimal outcomes, such as decreased intrinsic motivation. In the opposite
to this, providing choice and acknowledging feelings can enhance intrinsic
motivation.

Following this thesis, Deci, Schwarts (1981), Ryan and

Grolnick (1986) and Deci, COnnel & Ryan (1989), have worked to
complement and continue demonstrating that, in real world scenarios, when
we provide autonomy support, relative to control (do it and it is
mandatory), it was associated with more positive outcomes, including more
intrinsic motivation, enhanced well being and increased satisfaction.
Other experiments have led that positive feedback enhanced intrinsic
motivation relative to no feedback, and that negative feedback decreased
intrinsic motivation. For last, intrinsic motivation involves people freely
engaging in activities that they find amusement and interesting, and that
provide, for them, optimal challenge.
The other type of motivation is extrinsic motivation, and this one starts
with the external regulation. This is when peoples behavior is controlled
by external contingencies, i.e. when people behave a certain way to get
tangible rewards (Skinner, 1953). Identification is the process through
when people recognize and understands the underlying value of a behavior.
For example, if people identify the importance of diet and exercising,

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people would regularly do it more volitionally. Thus, the behavior would


be more a part of their identity. For last, their behavior would be more
autonomous, although it would still be extrinsically motivated because the
behavior would still be instrumental, this is, be healthier. For last, the
result is more self- determined extrinsic motivation. When we explain
autonomous and controlled motivation, we always understand this as when
no internalization has occurred, and peoples behavior is regulated by others
administration of contingencies.
Goal directed activities are autonomous activities, and self- determined
activities, since they are with a full sense of volition and choice.
The most important idea is that rewards, and particularly economic
rewards, may change intrinsic motivation.

in the recent years the

crowding-out effect, called today as is, is one of the most important


anomalies and differences in the economic theory, and it explains the
opposite of the economic lay: that raising monetary incentives increase
supply. With time, a bigger number of economists and psychologists state
that there is the theoretical possibility that motivation may be negatively
affected when before non- monetary relationship is transformed into an
explicitly monetary one.

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Economists of the nineteenth century tried to address different questions,


all regarding well-being,, motivation, the need for financial success, and all
of those question arise from Lionel Robbins economy definition:
Economics is the science which studies human behavior as a relationship
between ends and scarce means which have alternate uses. Economists
have always recognize non economic motives for action and desire.
Among them we may find, creativy, lust of power, social concern, just to
name a few of them. And the answers of why individuals seek one of
these, is the answer of motivation, and the goal desire. What drive us all is
the desire to satisfy our wants to the utmost with the least effort, to
procure the greatest amount of what is desirable at the expense of the least
that is undesirable. Jevons (1856). In conclusion, economists try to
explain human happiness.
David McClelland was one of the first psychologists in relate motivation
and economics. He classifies first needs, the satisfaction that produces any
type of pleasure, and fears, the avoidance that reduces pain. In fact, there is
an economic principle of Gregory Mankiw that states that people move
with incentives, and that these incentives could be good or bad, dependind.
We have bad incentives if we behave or not behave accordingly, or we
could have a prize, if we behave accordingly. The drive to achievemendt,
says McClelland is learned in early childhood as parents place expectations
on their children with respect to independence, mastery of tasks, and caring
for themselves. Thus, parents teaching will be relied on religion, social
relationships, life style and culture, among others.
The term coaching has become very popular in recent years among
different fields and for different topics and duties. The practice of coaching

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is specifically focused on setting the goals, creating the outcomes, and


managing the change, in order to making the topics. The International
Coaching Federation, also known as ICF, explain that coaching is nothing
more than partnering with clients in a thought-provoking and creative
process that inspires them to maximize their personal and professional
potential. The use of coaching started in the 1930s when theoretical and
empirical evidence started to emerge.
For centuries individuals have used coaches to enhance performance and
reach higher levels of achievement in their fields. But recently is when the
term coaching has emerged as a new solution to solve problems and to
overcome inertia. There is a big widespread among coaching in all the
fields and the development of coaching provides an excellent support for
businesses and individuals.
Grant (2004) argued that coaching has outgrown its current proprietary
knowledge- based status, and many coaches are advocating a shift toward
more research that will provide theoretically grounded, evidence-based
knowledge to support it. What Grant suggests is that there is a need, a
necessity, to unify the knowledge terminology with the theoretical base, so
any consumer, or researcher, or coach, or any individual in the area, can
approach coaching with real statistics, having a verified source to turn into
it.
Cociveria and Cronshaw (2004) has described coaching as a very holistic
task, while Williams & Dacy (2002) has described coaching as very client
centered. Creane (2003) explains that coaching is nothing else than the
emphasis put in the clients capacity towards his own choices to create the
desired outcome and thus, the desired life style, achieving personal
fulfillment and also well being. Diedrich (1996) suggests that coaching is

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very humanistic, while Whitworth, Kimsey-House, & Sandahl, (1998)


explain that coaching is when coaches holds and suggests the coached
agenda.
The first study that we could find appeared by Gorby (1937) in which
older, managerial and senior employees coached newer employees on how
to reduce waste and increase profits. Later on, some articles appeared on
coaching by hand of Bigelow (1938) explaining the benefits on coaching,
on any subject, and the importance on how coaching acted as a booster of
performance, and other improvements, either personal, financial, or
managerial, inside any project or company. Also, we can find research by
hand of Hayden (1955), that explained how performance with coaching
facilitated productivity and continuous behavioral change in the individuals
who where performing it.
Mahler (1964) was the first one in publish a research on training managers
more effectively with coaching. It was in the 70s, 10 years later, when
coaching started to be known and popular among teams within
corporations.

Hereafter, professionals of diverse areas, as athletic,

managerial, business, families, churches, both academic and nonacademic, started being consumers of coaching.
The term coaching began to be used as common among non academics as a
substitute or synonym to describe several practices of consulting and
counseling, in a remedial to see them different from counseling and
consulting. Actually, the term had another vision from the consumers and it
development began common, with a steady and individual growth (Stern,
2001). In fact, Kilburgs define coaching as: an emerging competency in
the practice of consultation. The authors Witherspoon & White (1996)
gave a simple idea on why coaching became so popular, when they stated

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that coaching brings out the best in people. This definition of coaching is
very broad because it explains that people do not limit they fears,
individuals now have more self- steem to dig into new abilities and develop
them with confidence, and increase performance, also by preparing them
for change and advancement into new places.
The first research in coaching was internal coaching, by Grant (2004).
Internal coaching is explained by the coaching provided by any manager or
boss (Frish, 2001).

External coaching is then defined as any type of

coaching that is done by individuals from outside the company, generally


with confidentiality. Lewis (1947) started with internal coaching with peer
reviewed literature, describing how coaching was implemented in
companies, and observing the results from it. In this poque, coaching was
called supervisory training.

Later on, it was called executive

advancement, by Parkes (1955), and Managerial development (Allen,


1957).
In the 1960s started, according to Grant (2004), a second trend in coaching.
This new trend continued until the 90s. During this period new techniques
came and also it was developed a more serious approach towards research
in coaching.
The third trend is based on empirical findings and studies written since
1990, by Conway (2000), Delgado (1999) and Kleinberg (2001), also
Wilkins (2000), Peterson (1993) and Miller (1990).
This paper is not based on therapy, but in coaching. Since traders are going
to be coached, we must understand the rivalries and differences between
one and the other one. While a lot of individuals understand that coaching
and therapy and similar, we must explain how contrasting they are.
Coaching is done generally in sports, in family, in church, in business and

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any other personal growth, (Hayden & Whitworth, 1996). The divergence
with therapy is that therapy is a healing intervention of a psychologist or an
individual which uses medical strategies and medicine. While in therapy,
there is typically an intervention from an expert in a treatment for any ill as
depression, coaching do not heal, but improve. Also, while therapy deals
with the past, coaching deals with the future to come. In coaching, the
perspective is the future, and the past is only used to have a good and
objective starting point.
Generally, in history of coaching, coaches are hired from outside the
company or the organization, due to the need for a quick response of
managers and employees, developing already existing techniques proven in
the past by those coaches.

Wasylyshn (2003) specified the need for

external coaches as preferences to a higher performance in a shorter time.


Life coaching differs from any other type of coaching. According to Kiel
(1996), cautioned that a common assumption, but wrong, is that managers
in any high level do not need personal development. Although executive
coaching focuses on managers and organizations leadership goals
(Saporito, 1996), some authors (Diedrich, 1996) explained how important it
was coaching for life purpose, while combining values, religious beliefs,
personal, business and professional goals, among others.
The most comprehensive literature about life coaching research has been
done in Transtheoretical Model of Change, TTM, and it is performed by
Grant, 2002.

Grant (2002) assesses that coaching appears to promote

clients move from a self- reflective stage to an action stage.

The

participants of this experiment where individuals who failed in attain goals,


in the past. After the experiment, those individuals demonstrate increased
goal attainment but also experienced enhanced mental health and a better

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well being, including a better self- steem. In another study, Grant (2003)
discovered that patients who performed coaching for a long time assured
having more accountability, recognition of internal barriers, and a
flexibility in perceiving differently the situations, also for self-discovery.
Williams & Davis (2002) explained that life coaching is a powerful human
relationship that focuses on the future.
Blattner (2005), Frisch (2001) and Lowman (2005) explained that trust is
very important in the coach / coachee relationship. Kiel (1996) suggest too
that coaches need to get all the information and data they can from their
clients so they can guide them better towards a brighter future.
In a survey made by Hart (2001), the respondents said there must be a nice
relationship between the coach and the client, that must be collaborative in
nature, and that the coach is not in charge of the process, but serve as a
guide in co-creating clients goals. Bugas & Silberschatz (2000) found in a
study that the behavior of patients during coaching changed for being
active engaged in prompting, and instructing the coach, thus, the coach
could guide them more effectively. This phenomenon was written by
Levinson (1996), who stated that since coachee depends on the coach for
his advice, insight and information, he knows (coachee) that a better
information from the coach should be better for him to change.
Kilburg (1997) clarifies the qualities of a successful coaching outcome,
being respectful, considerable and predictable. He also states that coaching
must be empathetic, friendly and tactful. For last, Kilburg explains that
coaching must include skillfulness, knowledge, and be non-defensive.
Ultimately the coach is the one responsible for making the client participate
in the coaching process.

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Other qualifications that coaches must have are explained by Katz and
Miller (1996) who said that coaches must be careful, gentle and honest.
Diedrich (1996), in another experiment, explained that coaches must be
practical and have a lot of quality in their work. Kiel (1996) added, years
before, that coaches must have a good rapport building, and flexible and
creative. Other researchers have found (Modoono, 2002) that coaches must
be approachable, have compassion, and be customer focused, have
integrity, among others like being politically savvy, and have listening
skills.
In a study made by Wasylyshyn (2003), the report included that coaches
have the ability to form coaching alliances, be very professionals in their
cause.

Graham, Wedman and Garvin-Kester (1994) years before have

documented that the coaching skills had clear goals and provided regular
feedback.

This qualification of coaches is also explained by Kampa-

Kosesch & Anderson (2001), who also explained that coaches are inspiring
in commitment, are facilitators of growth and are persistence toward goals
and always encouraging the client to make maximum use of environment
support. Another important role, this one detailed by Peterson (1996) is
that coaches must be involved in the development of the skills and the
performance of its coachee, and that they help their coaches to grow, learn
and change.
One of the model of coaching is found and made by Saporito (1996). In
this four stage model, the first model is the foundation. The foundation
consists in explaining the context of the process by identifying the
imperatives of the organization, and the actions required to fully complete
the expectations of the project. The second phase is assessing the clients
strengths and weaknesses using a 360 degree feedback tool. The third

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phase is developmental planning. The last phase is the implementation and


development of the plan resulting in growth and better well being.
Another coaching process in phases is presented by Peterson (1996), and he
states:
1.

Formation

of

partnership.

Build and maintain rapport.


2.

Inspire

commitment.

Fostering insight and motivation.


3.

Support

skill

development.

Through feedback and other tools.


4.

Promote

Promote

active

experimentation

persistence.

and

consistent

practices.

In this phase Peterson (1996) argues that coach must collaborate in fighting
fear

of

5.

Shape

failure.

the

clients

environment.

This is done by encouraging the client to seek sponsors and role models,
who can provide feedback in the long term, to support the continuous
growth.
Another coaching system is presented by Kilburg (1996). In his work he
present
1.

system

of

Development

5
of

components,
an

explained

intervention

here:

agreement.

During this phase we define goals, condifentiality, and the general process.
A
2.
3.

commitment
Forming

is

made
a

strong

in

terms
coach

of
and

time

and

client

resources.
relationship.

Creating and managing expectations of the coaching process.

4. Facilitation of behavioral and cognitive skills to master the problems

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that

will

arise.

5. Continue the evaluation of the client progress


Another researcher in contribute to the life coaching environments was
Kralj (2001), that delivered a case study showing how individuals and
teams promote self learning. He stated that fostering individuals behaviors,
the process of coaching would be self- correcting. In his model, the first
stage is when the goals are chosen for the next three steps. The second
phase is the selection of managers who have coaching abilities. The third
phase is to carry out the plan it was designed in the first two stages. Later
on, Kilburgs (2001) developed a system approach on coaching that was
focused on resistance, and how to deal with it in organizational changes.
Empirical evidence has shown that coaching models have produced
behavioral change in different fields as medicine, sports, education, and
others as organizational. In fields as sports or education, researchers have
studied the variables that enhance performance, and, in medicine, have
been studied the variables they think influence directly to the health and
that are beneficial to the issue that matters.
In 1996 Kilburg revealed that athletic coaching has been widely used, and
research intensively. He also explains that the coaching techniques have
not being duplicated in the personal or professional arenas of coaching.
The researchers Miller, Ogilvie and Adams (2000) have assessed on the
learning process, the personality and how the competitiveness is beneficial
of athletes in the coaching process, and how it differs something when
comparing it with the professional or life coaching. In fact, Miller, Ogilvie
and Adams have addressed and examined carefully the athletes
determination, emotional stability, and control, and how personality traits
affect them. Miller (2000) examined the athletes competitive profile, his

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determination, concentration and his mental toughness, combined with his


emotional stability. In 2005, Blatner utilized an assessment tool in order to
check the behavioral style. James (1950) was one of the first psychologists
in assess how self-esteem, as an important aspect of human personality,
affects performance, and has been studied by him due to the great
impression of self-esteem in sports performance of athletes.
Rogers (1980, 1989) understood that self concept is as very important for
the personality and that this (self concept) influenced behavior. In a later
study, Smoll, Smith, Barnett and Everett (1993) studied the effects on how
coaching affected the athletes and their self esteem, in order to present
better, equals or worse behaviors, and the results showed that athletes that
trained with sports coaches presented behaviors where self esteem was
regarded more positively.
Banduras work (1977) most important topic was in order to express the
importance of believing in ones own capabilities to plan, execute and act
in order to reach goals.
Maurer (1998) found that role- playing served to increase clients in
gathering information to learn new skills and better performance. In the
same page, Palus (2003) referred to story making to stimulate growth,
increase productivity, and the development of new skills.

IN medical

coaching, Quick and Macik-Freys (2004) understood that in order to


produce health enhancement, developing a journal, as a mean to a greater
understanding of the problem, in order to developing a simpler emotional
issue, and to progress toward the goal completion, was very useful.
But before explaining how psychology, coaching and behavior has
impacted finance and economy, value of stuff, creating a new (since the
1970s) path for finance and economy, called behavioral finance, we need to

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address another research and important topic that will be covered in our
research investigation and method, and this is positive psychology. We all
know that positive psychology came to uncover another field, and not so
good looking, psychology, the one that addressed pathologies. This one,
positive psychology, is used by coaches (Seligman & Csiksentmihalyi,
2000) in order to focus on performance, well-being and self- esteem, and
other attributes of individuals that arise in order to performance in
organizations, athletics or personal projects in life.

Past research has

already addressed that strengths are extraordinarily reliable across cultures


and countries, and that these strengths are always associated with a better
well- being (Park, Peterson & Selig,man, 2004).
We can explain that strengths are natural capacities that we yearn to use,
that enable our natural and intrinsic expression of self- being, and that
energize us for a better well- being.

In an experiment, Clifton and

Anderson (2002) explained talent as a naturally recurring pattern of


thought, feeling, or behavior that can be productively applied a great
number of talents naturally exist within you They are among the most
real and most authentic aspects of your personhood.

The principal

characteristic of using strengths were defined by Linley and Harrington


(2006) as vitality, invigoration, intrinsic motivation, yearning and
authenticity. In other experiments, different researches, Rogers (1963) and
Horney (1951), discovered predictable effects on how humans tended
towards self realization, and how humans will always try to express
authentically with vitality.

In fact, Sheldon & Elliot (1999) made a

surprising research where they found evidence on how individuals with


self- concordant goals were more likely to pursue them and, as a result, to
feel happier and have a better well-being
2001).

(Sheldon & Houser-Marko,

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There is also an extensive evidence about financing in new entrepreneurial


projects, and evidence that support failure in the first year of developing.
In fact, Camerer and Lovallo (1999) explains that there are three
alternatives in order to improve the rate of return in the first 3 years of any
new endeavor. This strategies are called hit and run and they profess
different topics among the same field:
1. Entries are profitable but only for short periods of time.
2. Business success is a low probability high return event.
3. New firms can enter in mistakes too often.
This three reason are very common in the practical side of the businesses,
and the three reason promote a common cause: intrinsic optimism. This
means that individuals tend to overestimate their capacity as entrepreneurs,
their intelligence, their abilities and their luck in business, and this is
appealed by Keynes (1936), and also by De Bondt and Thaler (1995), that
people generally, according to theoretical and practical psychology tests,
perhaps the most robust finding in the psychology of judgement is that
people are overconfident.
Empirical research has demonstrated how individual investors fail to meet
the financial investment portfolios benchmark, when trading independently.
(Barber & Odean, 2011).

They assess that individual investors

underperform the standard benchmark, sell quickly winning investments


and also keep holding losing investments, and also hold undiversified stock
portfolios. The importance of this research paper, and empirical paper,
resides in how we need to address their advices in order to, when analyzing
the market and the Foreign Exchange Market, specifically, we need to sit
down with the advices of coaches, researchers, financial experts, trading

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experts, psychologists, and also behavioral finance experts. We provide


theorietical framework by defining that the economics theory have been
built on the theory that individuals (human beings) are rational agents who
will always maximize wealth by minimizing risk; this goal will be done by
analyzing different types of markets and market conditions, and then
selecting one accordingly with the level of risk that is suitable for them.
A large body of empirical research explains that real investors perform
decisions very different from those on the theoretical explanation given, i.e.
by the Capital Asset Pricing Model, CAPAM, on well diversified portfolios
according to the risk aversion. In reality, according to all of this body of
research done, most individual investors trade actively, speculatively, and
in their detriment of their portfolio. In the stock market, real investors are
not only influenced by rational economic issues and information, but also
by the companies that are close to them and the stock employer benefits
that these companies may offer.
Also, and this is very important for the analysis in the experimentation,
real investors are influenced by the media. This means that individual
investors tend to pay attention and emotion to what they listen and hear,
maybe not objectively, and these news can influence directly what they
trade, how they trade and why they trade it. Grinblatt and Titman (1989)
analyzed how superior performance exist for some mutual funds, according
to a brief period of time. In another experiment, DGTW (1997) described
the same conclusion with similar experiment rules, but with a larger
sample. As (Barber & Odean, 2011) explain, with some exceptions, the
average individual investor hurts its own performance even without trading
costs, or taxes (since taxes are discount on a yearly basis, and losses may
take the takes of winning trades). It is safe to argue that, ceteris paribus,

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investors who trade actively will earn lower returns than buy and hold
investors. Grinblatt and Keloharju (2000) assert, on 2 a two year empirical
research, supportive evidence regarding poor returns earned by individual
investors.

Another empirical experiment comes from Taiwan, where

Barber, Lee, Liu and Odean (2009) scrutinized data of trading records in a
period of 5 years, from 1995 to 1999, from the Taiwanese stock market,
and the results also showed that these experiments led to lower rate of
return than the market benchmark.
In another empirical experiment, Kelley and Tetlock (2011) used data of
several retail brokers in the period of 2003 and 2007, and analyzed the
behavior of individual investors. In the experiment they understood that
investors have positive returns in periods up to 20 days. This experiment
differ extensively with the empirical research of Barber, Lee, Liu and
Odean (2009), where they documented how individual investors in Taiwan
incur in losses over short horizons of time. In another empirical research,
Andrade, Chang and Seasholes (2008) document a similar result using
changes in stock in a period of 1994 to 2002.
An important empirical research was done by Barber, Lee, Liu and Odean
(2011), and they analyzed day traders in Taiwan in a 14 year period, since
1992 until 2006. Their total account balance was about the 17% trading
volume, and this is an incredible finding in order to demonstrate the
quantity of day traders and speculators, that are trading in the Stock Market
in Taiwan not for tax reasons, or rebalancing or liquidity, but for obtain
profits from their trades. Furthermore, they ordered the traders, and found
that the 500 best traders earn intraday, returns that outperform the
thousands of traders who perform poorly, and this behavior accelerates the
thesis of the ability of those traders.

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Another empirical research suggests by Korniotis and Kumar (2009a)


suggests that demographic variables predict cognitive abilities of day
traders. This is, smarter investors outperform others due to demographic
and similar characteristics. In a second research, Korniotis and Kumar
(2009b) showed that investment performance declined with age.
Ivkovic, Sialm and Wiesbenner (2008) explain in an empirical research
paper how informed investors tend to perform with higher returns than the
market concentrating their portfolios in stocks they have informational
advantage. In other research, Barber and Odean (2001) found that men
trade more than women, and for this reason, men tend to have poorer
returns, since this hurt their performance in the long run. The excessive
trading of men in the financial markets leads to lower returns than their
counterparts women.
One question that always arise is why investors, already having the
expectation they will not beat the market expectations or benchmark, and
also know they are in a position of not having all the information needed in
order to objectively taking a decision in the equity markets is why they still
do it? One of the answers is overconfidence. There is a vast theoretical
framework in psychology on why individuals are overconfident. Moore
and Healy (2008) and Odean (1999) explain the reasons. Generally one
think that one knows more than one actually does. A second reason on
why individuals tend to be overconfident, is that people think they are
better than the median person. Svenson (1981) proposes this theory based
on an experiment made asking individuals how they think they drove in
comparison with other drivers; and most people answered they drove above
the median driver.

In the equity markets, several experiments and

researches have been done in order to demonstrate how individual investors

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are overconfident, Benos (1998), Odean (1998), Peng and Xiong (2006)
and Wang (2001) are just a few researchers that have created and used
models to demonstrate overconfidence in the individual investors.
Closely tied to overconfidence, Graham, Harvey and Huang (2009) have
addressed the issue of self- assessment of competence. In this empirical
research, they describe that investors are willing to bet on their own
judgments when they feel skillful or knowledgeable. For this, they made a
questionnaire to individual investors, about How comfortable do you feel
about your ability to understand investment products, alternatives, and
opportunities?
Another reason is attention, and recent researches explain that individual
investors show a limited amount of attention that they can devote to the
trading activity. Attention can affect the trading behavior and activity in 2
different ways: on one side we understand that individual investors take
little attention to important information that can result in a delayed action
or reaction to important decision; and on the other, since they devote little
attention due to the fact that maybe they understand the data is not
important, this information can lead in an overreaction. Hirshleifer, Lim
and Teoh (2009) explain that the some smaller firms try to inform about
earning season in the same day or week that bigger companies are doing it,
this because companies are competing for investors attention. Similarly,
Dellavigna & Pollet (2009) express that Fridays announcements are taken
not so serious by investors since they are already distracted on Fridays.
Barber & Odean (2008) affirm that attention influences directly the
individual investors decision in purchasing a stock in the equity market.
They understand that investors only pay attention to stocks they first watch,
this is, stocks that at a first sight catch their attention. This lead investors to

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buy and hold stocks that they now are comfortable with. In an empirical
experiment, Da, Engelberg and Gao (2010) used Google searh engine as
the frequency, for measuring the investor attention to analyze if this
attention could have an effect in the price pressure, described years before
in the research by Barber and Odean (2008). Thus, the final analysis is that
search in frequency in Google predicted higher returns in the ensuing 2
weeks and a reversal eventually in a year.

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ANALYSIS

Because the field of research being evaluated concerns reward effects on


peoples and traders intrinsic and extrinsic motivation for a very interesting
activity (trading in the foreign exchange market), we used 2 control groups.
Chandler and Connell (1987) discovered that, increasingly with age,
children displayed internalized behaviors that were originally externally
compelled, this is, internalization does not happen automatically. William
and Deci (1996) provided data to explain how internalization occurs.
In a series of studies, behaviors are done (make homework, take pills,
exercise, among others) are done due to a different internal and external
reasons. Grolnick and Ryan (1987) found that students who were more
autonomous in reading text material showed greater understanding of the
material than those who were more controlled. Black and Deci (2000)
showed that college students who worked autonomously showed more
motivation, enjoyment, during the course, and got higher grades than those
who were more controlled in their motivation.,
In another research, Williams and Deci (1996) explained that medical
student who shoed more autonomy felt more confident during medical
interviewing. In another study with college students, Sheldon and Elliot
(1998) analyzed how students with more autonomous behaviors pursued
and achieved goals among others who did not.
The casuality orientation is an approach where different processes take
place in the goal directed behavior of an individual, and where the
individual differences are when individuals are autonomy oriented,
meaning that they regularly behave on the basis of interests; are control

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Rethinking risk: The impact of motivation and action on
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oriented, signifying that they are oriented towards their behavior (they
think and act how they should behave); they are impersonally oriented,
which means focusing on indicators of ineffectance and not behaving
intentionally.
Deci and Ryan (1985) understood in this experiment that individuals that
are autonomy oriented they relate positively with self-actualization, ego
development, and other indicators of well being, as self-steem. In a set of
experiments, Koestner, Bernieri and Zuckerman (1992) explored the
relationship between autonomy and controlled orientations. They separated
individuals according to whether they behaved autonomous or controlled.
The results showed that autonomy-oriented individuals displayed a strong
positive relation among behaviors, whereas those who were controloriented, displayed weak or negative relation among various aspects of
their personalities.
Other studies have shown that general autonomy and controlled
orientations are predictive in various domains. Vallerand (1997) and the
research made by Williams and Deci (1996) established that causality
orientation predicted students and their learning styles, or patients and their
diets for weight loss and exercise. Ryan (1993) showed that it is peoples
nature to develop greater autonomy.
In recent studies, Deci have addressed how satisfaction of autonomy,
competence and relatedness are linked directly to well-being. And, as
scholars and others may know, well-being is the psychological health and
life satisfaction. Well being is the vitality, its presence or abserce, it is
flexibility, and a deeper sense of wellness (Ryan and Frederick, 1997).
Ryan, Sheldon and Deci (1996) claimed that life goals and their pursuit
could provide a bigger satisfaction in the sense of psychological needs and

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Rethinking risk: The impact of motivation and action on
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the vitality to produce other goals and attain them, and, for last, having
greater well-.being and vitality. Researchers as Kasser and Ryan (1993)
have distinguished from intrinsic aspirations and extrinsic aspirations, that
are both signs of approval, from oneself, and from the community, and are
both signs of worth, and of satisfaction, one an inside, another one outside.
Kasser and Ryan (1993) found in a study that intrinsic aspirations, as
personal growth, also relationship and the development of community
involvement, was positively linkaged with self actualization and vitality
and that the higher financial success, the lower the self actualization and
tha vitality, resulting in depression. Kasser (1998) established that wellbeing was enhanced with intrinsic goals, whereas extrinsic goals provided
little benefit for well-being.
Latham (2002) understands that goal setting is a very effective coaching
technique since it is very motivational and has demonstrated to increase
productivity in corporations and management. Locke, Shaw, Saari and
Latham (1981) has addressed how goal setting has increased productivity
among the organization. And they also found that external motivation,
combined with positive feedback and praise, in conjunct goal setting, has
demonstrated to enhance athletic performance among any sport. Also, in
another managerial experiment, goal setting, combined with appraisal and
positive feedback, demonstrated (Nemeroff & Cosentino, 1979) to be more
successful in increasing productivity. In any major coaching meeting, the
goal setting process may include some benefits, as increasing flexibility
and effectiveness; improvement of social competencies; professional
advancement; the ability to balance professional and personal life is
increased too; and the ability to positively affect the organization is also
increased.

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Rethinking risk: The impact of motivation and action on
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Feedback is a very important coaching tool, contributes increasing


acceptance and self esteem, according to research in athletic field (Smith
& Smoll, 1990). Positive feedback, according to investigations made by
Brotman (1998) contributes the client (coachee) to have more insight with
his or hers concerns, with his or her own subjective experience, which can
lead to a better management and the elimination of subjective decisions of
distortion events.
Diedrich (1996) warned that not only feedback is important, but also the
way feedback is advised, including to be specific, and accurate. Maurer
(1998) advised that feedback concerning good past performance helped
coaches to enhance future performance in future activities and projects,
regardless of their nature, either personal or organizational. Smith & Smoll
(1990) specified that the feedback should be given by a coach, if it was
going to produce positive results; hence, if it was provided by someone
else, the result would be different. In separate researches, Anderson (1988)
and Feltz (1999) established that coaches who had great self- efficacy were
more prone to give better feedbacks than those with low self- efficacy, thus,
the productivity of coaches would be different.

Our setting for the experiment takes the same assumptions and variables
than those in earlier experiments like Glosten and Milgrom (1985). We
provide the categories we are studying: The FX traders are those who
subscribe sell and buy orders during the day. Hence, active traders are
those who make spot transactions all over the day, when finding a price
action that suggests and aligns with their strategy. In the Foreign Exchange
market we consider each of the participants risk neutral, and myopically
competitive.

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Rethinking risk: The impact of motivation and action on
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Always, the trades takes place only 1 at a time (the trader can only enter in
1 trader in a given time, since he is only one studying a pair of currencias
(i.e. EURUSD or GBPUSD). The trades consists in entering the market
buying or selling a currency pair, this is, a risky asset, with a true value, V.
Since this can take only two different paths, you can find a Vh or a Vl (V
high or V low), depending on where the market is going. The value V
hence, becomes public information only in a Time T, when it takes the Vh
or the Vl.
The operation runs as following: The foreign exchange trader makes a
decision at time T, and he randomly takes a position or a trade. Obviously,
he can deny entering the market, but he will only enter the market when he
decides to buy or to sell, in a spot market transaction. Our intention with
this research is to compare the outcomes of this procedure with and without
a proper guided coach, who will mentor the trader in a second experiment.
Concerning the degree and accuracy of information, and intrinsic and
extrinsic motivation at their disposal, traders can be divided in 2 different
categories: the coached and the non-coached. First, we need to explain
what drives both of them. The first one is driven by extrinsic and intrinsic
motivational variables, but without proper coaching, each trading
conclusion can lead to a greater degree of self-esteem and a lower degree of
objective market direction. The second group studied is concerning the
same traders, but now are guided with a Coach that, with several activities,
their goal is to maintain them with a great level of logic, so they can take
better decisions.
Second, the approach of the coach consist in several activities like story
making, role playing, positive feedback, journaling, and brainstorming and

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Rethinking risk: The impact of motivation and action on
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reframing, in order to help the traders to keep it up with the logic of the
market.
Both traders are uninformed traders, since we understand that some traders
may have accurate information of the future value of an asset (currency
pair). The traders in these experiments are driven by exogenous reasons,
and the information they have in order to make a decision is public
information available.

The only information traders have, in this

experiment, is technical information that they may find in order to converge


data, with the same conclusion when deciding to buy or sell the asset
(currency pair), this, to exactly recognize the economic situation and
choose the better outcome for the liquid asset.
We comment here that imperfect information (the only information traders
will have to make this experiment) is the information derived from public
market data (charts) by any method, for example, technical analysis,
fundamental analysis and sentimental analysis, these, that are used by
traders in practice to achieve positive performance. Since this data is
always publicly available, technical foreign exchange traders always tend
to predict how the market will move, for any given currency pair, according
to this information, at any time t. Given this conclusion, we can also infer
that the probability of imperfect information should be very high, closely
related and near 1.
Damasio (1996) explains emotions as the combination of a mental
evaluative process, simple or complex, with dispositional responses to that
process, mostly toward the body proper, resulting in an emotional body
state, but also toward the brain itself and resulting in additional mental
changes. Knowing this, the coach, in the second experiment, relies on
primary and secondary emotions.

The primary emotions are sadness,

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Rethinking risk: The impact of motivation and action on
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happiness, anger, fear and disgust. And research has demonstrated that
traders incur in this emotions during any given trade. For this, the coach
teaches the trader to focus in each trade, since each trade is independent
from another, and to focus its attention in how the market price is evolving
during each trade, and during each time t, and during each currency pair.
Also, the coach needs to teach the trader to understand and control their
secondary emotions, such as shyness, panic, melancholy, euphoria, remorse
or vindication. There is also a a category of emotions in the body called
mood and this happens when periodically you have the same conjunct of
primary and secondary emotions. While emotions may last for several
minutes or hours, moods, in the opposite, may last for days or weeks. Also,
we have to note that the coach wants to develop in the trader a personal
trait; this is a conjunct of primary and secondary emotions that affect
positively the mind of the trader, in order to take trades, but do not blind
them for taking randomly choices in the foreign exchange market.
The coach consider controlling the emotions since theoretical experiments
have demonstrated, by psychologists and neurobiologists, that emotions
always have impacted human decisions.

In fact, Oatley and Kenkins

(1996) describe emotions as the center of human mental life.


Coaches agree that emotions are good factors in enhancing decision
making processes.

Recent studies have shown these implications.

In

studies, emotions show that pure rationality is just a theoretical abstraction,


but, in practical terms, emotions may help enhance the decision making
process in order to foster an optimal and more practical situation. In a
recent empirical research made by Lo and Repin (2002), where they
studied the psychological effects on traders while day trading, and their
psychological responses, they conclude that experienced traders show a

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Rethinking risk: The impact of motivation and action on
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lower grade of emotions reactions than novice traders, but they also
conclude that emotions always become manifest, regardless of experience.
The thing is that rational traders form beliefs by combining prior and
current information and then they have an attempt to maximize the
expected outcome for an equity, in this case, a foreign exchange currency
pair, in the sport market. Emotional traders also rely on their intuition, and
then make a decision.
At any given time t, having liquidity in the market, and considering the
Foreign Exchange market is the most liquid financial market on the planet,
with 6 trillion dollar traded each day, according to the Bank of International
Settlements. After they have done a market research, they summit the
orders, and are filled in the spot market, and can be either a buy or a sell,
also, these orders are executed instantly, or seconds later after the market
maker has provided execution and liquidity.
In our empirical discussion, we explore two hypotheses about how rational
traders perceive the past information and past events and past data, in order
to make a decision in the present, and with a given time t, undefined,
predict the outcome of the currency pair.
Our first hypothesis considers that rational traders, without any coaching
interventation, uses its beliefs, its intrinsic and extrinsic motivation, and
this noise could relate to lower gains.
Our second hypothesis considers that a priori emotional beliefs, with a
coaching that has eliminated the emotional irrationality of the active trader,
may result in higher profitability when day trading.
We consider rational traders those that work with a demand strategy. And
we also recognize that rational traders have a system approach based on

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Rethinking risk: The impact of motivation and action on
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technical analysis.

Hence, the rational decisions made by the rational

traders are considered born due to reasoning. The trading strategy is based
on market price action during 15 minute time frame, and a combination of
Long Term Moving Average, with Exponential Moving Averages,
candlestick formation in this 15 minute time frame, and also Fibonacci
reversals and trends. Finally, after combining these variables, the trader
must react in order to buy or sell an asset (currency pair), and to expect a
final price, with profits.
We had the same trader, trading for 40 working days.
The first 20 day trading (a month trading), we analyzed a questionnaire the
trader needed to made, while entering in every trade. In this questionnaire,
we see the primary and secondary emotions that may 234567890
The second 20 trading days are those impacted by a coach. We continue
with the same questionnaire, but also the participation of the coach makes
the trader to do other tasks.
In both experiments, we give a Time = t = and this time is given by 100
trades. The population is with 10 traders, trading independently one from
another, in 40 trading days. All the traders are trading in a demo account,
provided by the market maker Foreign Exchange Capital Markets, FXCM.
All the traders start with the same account, USD $50,000.00 and with a
leverage of 1:1. Thus, traders have the same Wealth, defined by W =
W=W=W=Wn

Impulsive emotional traders gain less than the rational traders.

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Rethinking risk: The impact of motivation and action on
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Emotional traders gain more than rational traders.


Coached emotional traders gain more than emotional traders without proper
coaching or rational traders with or without proper coaching.

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Rethinking risk: The impact of motivation and action on
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Conclusions
In sum, we can argue that coaching can enhance performance when
individuals are active traders in the Foreign Exchange Market. Moreover,
under certain circumstances, emotional traders can outperform the market
with higher efficiency, and this can be done when trading with proper
coaching, and then comparing these results with peers without proper
coaching, or with more rational active traders.
In unexpectedly many situations, we demonstrate how emotional traders
are better than their rational active traders in term of amount of trades, and
profitability of each trade.
One of the most important variables that impacts the active traders and
their beliefs trade after trade is the prices and the results of their choices.
Our main conclusion is that emotions play an important role in rational
decision making of price action in the financial markets. Regardless we
focused our attention in the foreign exchange market, we can recall that this
conclusion could be similar in other projects where attention of traders are
focused in more fundamental announcements, like in any stock market of
any given country.
The main goal of this section is to provide the real feedback of the model
we have developed, according to the testing parameters in the experimental
phase.

In this experiment, we can sum up that we have tested how

professional coaching, certified, can enhance profitability in the foreign


exchange market, when comparing to the same trader, with the guided
coaching. Prices are and always will be set by the competitive market, and
by the necessity of the market makers (offer and demand), that will make
all the price action to flow, over any given time t.

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Rethinking risk: The impact of motivation and action on
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Thus, we formally have represented a study where we understand how


public information is interpreted by emotional traders, and by focused
emotional traders, in order to pursue profitability in the market.

In

particular, we regard that emotional traders combine past and current


information, in conjunct with the Bayesian theory, thus, they make a
decision based on how this past will influence the future price action.
Moreover, the emotional traders, including the decision of the rational
traders, include also beliefs they have in the future price action, and they
weight all of this information, to make a choice in the price action. Also,
these emotional traders, when coached, are focused in a combination of the
present and past data that they have in order to make a decision. We cannot
demonstrate that emotional traders, when coached, only follow their beliefs
and heart, and assumption, when selecting a currency pair, but they do
formulate a story and then they make a choice.
We show how better emotional traders balance the past information and
data they have found and combine them with new evidence and data that,
with the proper coaching, results in better decision making for the price
action of any currency pair.
Finally, our model is tested only in the foreign exchange market, with
active traders (those who trade more than 10 times during the day, if
volatility and price action and strategy gives them the permission to do it).
Specifically, we examine how emotional traders, without coaching, trader
less when they loss in any position. We also show how emotional traders
continue trading with the same objective, even when they discover that a
past decision was bad for their economic balance and equity.
The emotional traders, in spite of their simplistic thinking model process
and the developing of strategies and different data gathering in their heads,

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Rethinking risk: The impact of motivation and action on
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and in their Microsoft Excel Sheets, makes them not only affordable to
survive in the market, but also to dominate the market with profits in every
single week.

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Rethinking risk: The impact of motivation and action on
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Results (Contributions)

In this section, we present some general information about the outcome of


the experiment. Second, we discuss how the .
For reasons of analytical simplicity, we focus on ceteris paribus prove
variations, in any given time, t, traders will pick an equity and trade
according their strategy. Also, if this currency pair, at the moment t, in any
point in time, does not meet the criteria of the strategy, the trader, coached
or not, will deselect this currency pair and look for another one.
In the first week of trading we say the greatest difference. In the chart we
can compare how The Active Trader Week 1 Without Coaching got the
amount of positive pips (and net profit), and then compare it to the first
week while trading with the coach. This professional coach guided the
trader with a first assessment called: How much Do I want? With this
assessment the coach sponsored the active foreign exchange trader in
gathering the main emotions that guided the individual into the trading
career and the foreign exchange market. A second activity was accepting
consciously how hard- working was to get some pips in the market, and
how tricky could all the strategies and financial technical variables mean,
for taking any financial decision.
The third activity done by the coach was in showing himself from days in
the past. This is, we recorded some short videos every day after the market
of US Session closes, and the trader had to explain his ideas and his
emotions.

The learning curve was accelerated since the trader could

identify, with the coach, which attitudes helped in order to get more pips

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Rethinking risk: The impact of motivation and action on
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and earnings in the market, and which emotions, primary or secondary,


stopped them from having more profits in the foreign exchange market.
In particular, more characteristics done by the coach included story lines,
where the active trader had to saw himself after beating the market average
earning, beating again when comparing to himself, and other unique goals
each trader had. Also, the coach guided the active traders while entering
into trades that they though were more profitable but the conclusion was
done more by instinct than by the strategy itself.

85.092
39.323
64.342
74.276
74.425
37.831
77.539
32.609
89.641
61.978
66.998
67.202
89.341
88.798
59.465
94.219
67.998
40.001
118.444
73.341
77.437
116.803
59.817
72.069
53.500
85.288
32.534

80417

4.675

80417 -41.094
80417 -16.075
80417

-6.141

80417

-5.992

80417 -42.586
80417

-2.878

80417 -47.808
80417

9.224

80417 -18.439
80417 -13.419
80417 -13.215
80417

8.924

80417

8.381

80417 -20.952
80417

13.802

80417 -12.419
80417 -40.416
80417

38.027

80417

-7.076

80417

-2.980

80417

36.386

80417 -20.600
80417

-8.348

80417 -26.917
80417

4.871

80417 -47.883

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Rethinking risk: The impact of motivation and action on
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92.857
101.769
25.066
79.294
138.114
64.090
63.436
95.774
77.098
64.544
53.402
32.464
65.605
121.352
69.922
86.813
85.586
59.902
85.861
69.568
35.662
116.269
82.256

80417

12.440

80417

21.352

80417 -55.351
80417

-1.123

80417

57.697

80417 -16.327
80417 -16.981
80417

15.357

80417

-3.319

80417 -15.873
80417 -27.015
80417 -47.953
80417 -14.812
80417

40.935

80417 -10.495
80417

6.396

80417

5.169

80417 -20.515
80417

5.444

80417 -10.849
80417 -44.755
80417

35.852

80417

1.839

/2

95%

0,05

0,025

1,96

90%

0,1

0,05

1,645

99%

0,01

0,005

2,576

Pips
Mean
Standard Error

73340,3
3521,21005
9

S
24898,71
5
24898,71
5
24898,71
5

N-1

73340,3

50

49

73340,3

50

49

73340,3

50

49

Inter
(N)^(1/2) Estim
+
7,07106 8041
2,01
8
7,07106 7924
1,677
8
7,07106 8277
2,68
8

t dist.

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Rethinking risk: The impact of motivation and action on
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Median

72705

Mode
Standard Deviation
Sample Variance
Kurtosis
Skewness

#N/A
24898,7151
1
619946014,
1
0,16712621
2
0,26011797
4

Range

113048

Minimum

25066

Maximum

138114

Sum

3667015

Count

50

Largest(1)

138114

Smallest(1)
Confidence
Level(95.0%)

25066
7076,13654

0
0
0
0
0
0
0
0
0
0
-5

-4

-3

-2

-1

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Rethinking risk: The impact of motivation and action on
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Mean
-4
-3,9
-3,8
-3,7
-3,6
-3,5
-3,4
-3,3
-3,2
-3,1
-3
-2,9
-2,8
-2,7
-2,6
-2,5
-2,4
-2,3
-2,2
-2,1
-2
-1,9
-1,8
-1,7
-1,6
-1,5

73340,3 Std. Dev.


-26254,6
-23764,7
-21274,8
-18784,9
-16295,1
-13805,2
-11315,3
-8825,46
-6335,59
-3845,72
-1355,85
1134,026
3623,898
6113,769
8603,641
11093,51
13583,38
16073,26
18563,13
21053
23542,87
26032,74
28522,61
31012,48
33502,36
35992,23

5,37499E-09
7,97854E-09
1,17254E-08
1,70603E-08
2,45756E-08
3,50493E-08
4,94893E-08
6,9183E-08
9,57515E-08
1,31204E-07
1,77995E-07
2,3907E-07
3,17906E-07
4,18533E-07
5,45529E-07
7,03984E-07
8,99425E-07
1,13769E-06
1,42476E-06
1,7665E-06
2,16842E-06
2,63531E-06
3,17085E-06
3,77727E-06
4,45488E-06
5,20178E-06

24898,72

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Rethinking risk: The impact of motivation and action on
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-1,4
-1,3
-1,2
-1,1
-1
-0,9
-0,8
-0,7
-0,6
-0,5
-0,4
-0,3
-0,2
-0,1
0
0,1
0,2
0,3
0,4
0,5
0,6
0,7
0,8
0,9
1
1,1
1,2
1,3
1,4
1,5
1,6
1,7
1,8
1,9
2
2,1
2,2
2,3
2,4
2,5
2,6
2,7
2,8
2,9
3
3,1
3,2
3,3
3,4
3,5
3,6
3,7
3,8

38482,1
40971,97
43461,84
45951,71
48441,58
50931,46
53421,33
55911,2
58401,07
60890,94
63380,81
65870,69
68360,56
70850,43
73340,3
75830,17
78320,04
80809,91
83299,79
85789,66
88279,53
90769,4
93259,27
95749,14
98239,02
100728,9
103218,8
105708,6
108198,5
110688,4
113178,2
115668,1
118158
120647,9
123137,7
125627,6
128117,5
130607,3
133097,2
135587,1
138077
140566,8
143056,7
145546,6
148036,4
150526,3
153016,2
155506,1
157995,9
160485,8
162975,7
165465,5
167955,4

6,01346E-06
6,88263E-06
7,79904E-06
8,74953E-06
9,7182E-06
1,06867E-05
1,16348E-05
1,2541E-05
1,33832E-05
1,41399E-05
1,47907E-05
1,53176E-05
1,57053E-05
1,59427E-05
1,60226E-05
1,59427E-05
1,57053E-05
1,53176E-05
1,47907E-05
1,41399E-05
1,33832E-05
1,2541E-05
1,16348E-05
1,06867E-05
9,7182E-06
8,74953E-06
7,79904E-06
6,88263E-06
6,01346E-06
5,20178E-06
4,45488E-06
3,77727E-06
3,17085E-06
2,63531E-06
2,16842E-06
1,7665E-06
1,42476E-06
1,13769E-06
8,99425E-07
7,03984E-07
5,45529E-07
4,18533E-07
3,17906E-07
2,3907E-07
1,77995E-07
1,31204E-07
9,57515E-08
6,9183E-08
4,94893E-08
3,50493E-08
2,45756E-08
1,70603E-08
1,17254E-08

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3,9 170445,3 7,97854E-09
4 172935,2 5,37499E-09

Pips Not Coached


Mean

73340,3
3521,21005
9

Standard Error
Median

72705

Mode
Standard Deviation
Sample Variance
Kurtosis
Skewness
Range

#N/A
24898,7151
1
619946014,
1
0,16712621
2
0,26011797
4
113048

Minimum

25066

Maximum

138114

Sum

3667015

Count

50

Largest(1)

138114

Smallest(1)
Confidence
Level(95.0%)

25066
7076,13654

/2

95%

0,05

0,025

1,96

90%

0,1

0,05

1,645

99%

0,01

0,005

2,576

24898,7
2
24898,7
2
24898,7
2

(N)^(1/2)

73340,3

50

73340,3

50

73340,3

50

7,0710678
1
7,0710678
1
7,0710678
1

Interval
Estimate +
80241,87172
79132,69055
82410,93711

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BUY
Orders
Mean
Standard Error
Median
Mode
Standard
Deviation
Sample Variance
Kurtosis
Skewness
Range
Minimum
Maximum
Sum
Count
Confidence
Level(95.0%)

13,75
1,772203
467
11
7
11,20839
887
125,6282
051
0,127231
83
0,866234
366
40
0
40
550
40
3,584619
861

BUY
SELL
Pips
Orders Orders Earned
11
31
72,3
21
51
81,2
2
23
59
9
35
74,9
0
21
43,7
36
60
130,5
13
30
68
1
23
51,2
16
45
72,9
5
26
71
4
31
66,3
18
41
91,5

Sell
Orders
36,075
1,882233
909
34
35
11,90429
248
141,7121
795
0,531124
398
0,574654
25
45
18
63
1443
40
3,807177
437

Pips
Earned
82,225
4,4412457
11
72,6
#N/A
28,088904
19
788,98653
85
0,4524795
02
0,6072579
08
109,8
36,1
145,9
3289
40
8,9832673
72

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40
7
5
6
12
28
14
8
7
38
1
17
0
10
24
35
2
15
13
10
20
3
3
7
26
30
11
22

63
30
35
29
35
56
38
26
33
55
19
40
18
32
48
53
24
32
36
30
38
20
28
27
48
52
35
46

Mean
Standard Error
Median
Mode
Standard
Deviation

145,9
62,2
56
97,8
70,2
101,6
87,4
69,4
65,7
135
36,1
92,6
39,3
71,4
100,5
120,8
54,9
74,6
109,1
69,8
100,8
62,9
86,2
54,5
121,4
130
63,3
127,1

Non
Coached

Coached

69,33157
895
4,451585
253
69,4
#N/A
19,40401
026

93,89047
619
6,542330
678
91,5
#N/A
29,98072
555

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Sample Variance
Kurtosis
Skewness
Range
Minimum
Maximum
Sum
Count
Confidence
Level(95.0%)

376,5156
14
0,041816
09
0,384486
149
73
36,1
109,1
1317,3
19
9,352433
572

898,8439
048
1,227747
34
0,192325
304
102,2
43,7
145,9
1971,7
21
13,64706
265

t-Test: Two-Sample Assuming Unequal


Variances

Mean
Variance
Observations
Hypothesized Mean
Difference
df
t Stat
P(T<=t) one-tail
t Critical one-tail
P(T<=t) two-tail
t Critical two-tail

Variable

Pips
Earned

Variable
Variable
1
2
69,33157 93,89047
895
619
376,5156 898,8439
14
048
19
21
0
35
3,103536
32
0,001886
095
1,689572
458
0,003772
191
2,030107
928

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Non
Coached
Non
Coached
Non
Coached
Non
Coached
Non
Coached
Non
Coached
Non
Coached
Non
Coached
Non
Coached
Non
Coached
Non
Coached
Non
Coached
Non
Coached
Non
Coached
Non
Coached
Non
Coached
Non
Coached
Non
Coached
Non
Coached
Coached
Coached
Coached
Coached
Coached
Coached
Coached
Coached
Coached
Coached
Coached
Coached
Coached

81,2
59
51,2
71
66,3
97,8
70,2
69,4
36,1
39,3
100,5
54,9
74,6
109,1
69,8
62,9
86,2
54,5
63,3
72,3
74,9
43,7
130,5
68
72,9
91,5
145,9
62,2
56
101,6
87,4
65,7

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Coached
Coached
Coached
Coached
Coached
Coached
Coached
Coached

135
92,6
71,4
120,8
100,8
121,4
130
127,1

Non
Coached
Mean
Standard Error
Median
Mode
Standard Deviation
Sample Variance
Kurtosis
Skewness
Range
Minimum
Maximum
Sum
Count
Confidence
Level(95.0%)

Coached

64,35 109,0375
2,6668047 5,6545695
97
02
67,15
105,35
#N/A
#N/A
13,064621 22,618278
99
01
170,68434
78 511,5865
0,4844843 0,0014597
04
25
0,4219533 0,3926343
85
22
56,5
86,9
36,1
59
92,6
145,9
1544,4
1744,6
24
16
5,5167060 12,052429
39
59

t-Test: Two-Sample Assuming Unequal


Variances

Mean

Variabl
Variable 1
e2
64,35 109,03

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Variance
Observations
Hypothesized Mean
Difference
df
t Stat
P(T<=t) one-tail
t Critical one-tail
P(T<=t) two-tail
t Critical two-tail

75
170,6843 511,58
478
65
24
16
0
22
7,147849
877
1,81604E07
1,717144
374
3,63208E07
2,073873
068

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LIMITATIONS

We comment how important it is to study the different types of coaching


approaches, and compare the results.
We recommend that coaching is an activity that is based first on the
acceptance of the coachee of needing a coaching, thus, we recommend
traders that can be self-coaches, and the implications of their self-coaching
methods, in the market.
We recommend further studies demonstrating how important it should be to
confer attention and power to the emotions of the market participants, and
make more empirical researches to demonstrate how coaching can
differentiate in any other activity where emotions take place in order to
perceive something with value

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Summary

The main goal of this thesis dissertation is to find the relationship of


coaching and active trading in the foreign exchange market. Moreover, the
principal objective of this thesis is show the relationship of coaching as a
driver to more profitability in this uncertainty market driven by market
forces. By presenting a positive correlation between coaching and active
trading, we can give several important suggestion to the market players in
order to increase their profitability and limit their exposure in the market,
while entering more winning trades.
We formally represent this study with the strategies of the traders, with and
without proper coaching (the same technical strategy based on technical
analysis), and how the active traders response to those price formations. In
order to do this, the first thing we did was to determine the risky asset, the
strategy, and the type of trader.

After this, to interpret the public

information available (and how to interpret this by technical and


fundamental analysis classes).
Our interest is to show how emotional traders can focus their emotions,
primaries or secondarys, in the market driven by market forces, and the
decision they take in order to increase profits in the price movement and
price fluctuation. Our main focus is to demonstrate how coaching can affect
positively active trading in the foreign exchange market. Our belief, and
our demonstrated thesis, is how trading can be improved with coaching.
We measure and compare how active trading, the same technical strategy,
different times t, with different traders with the same Wealth, W, and how
the Coaching effect of a business coach that will focus the traders attention

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with different activities and games, and how these conjunct of activities
forms a trader new mindset that increase its possibilities to have higher
income by higher winning trades, by higher performance in the foreign
exchange market.
Our simulation in the real market suggest that traders are emotionally
driven and free economic agents, that are or are not in demand of equity
assets, and who rationally expect maximization of wealth.
These findings support enhance the idea that coaching can improve active
trading activity.

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