Emotional Competence in Trading: Important for Your Success

May 16, 2018 (6y ago)

Note: The present article is an excerpt from: Effects of a five-week E-Learning intervention on Emotional Competence, Hövelborn, 2018

What is Emotional Competence?

Instead of the term Emotional Intelligence, some authors use the term "Emotional Competence" (EC). The reason for this is, among other things, two studies that showed that the competencies underlying Emotional Intelligence (EI) can be learned and taught, which is not in line with the definition of intelligence. For this reason, Emotional Competence is spoken of instead of EI in the following, but it is still the same construct, which is still found under the name EI in the literature due to its increased popularity.

To make Emotional Competence measurable, some working groups developed different tools, which were based either on the mentioned personality tests (e.g. Bar-On, 1997; Petrides, 2001; Petrides, Pérez-González & Furnham, 2007; Schutte et al., 1998) or on tests of maximum performance (Mayer et al., 1999; Mayer, Salovey & Caruso, 2002). Although it is possible to determine effects with these tools, these test procedures have a weakness. It is not possible to relate different competencies to different areas of EC. According to Brasseur, Grégoire, Bourdu and Mikolajczak (2013), for example, it can be assumed that the intrapersonal EC may have a higher effect on health prognosis than the interpersonal EC. Conversely, it can be assumed that the interpersonal EC has a greater influence on predicting the quality of a social relationship than the intrapersonal EC. This sounds generally very conclusive, but until now, it has simply not been possible to differentiate between different competencies on an intra- and interpersonal level. In their study, Brasseur et al. (2013) developed the Emotional Competence Profile (PEK) in four steps. The underlying test objects followed the EC model of Mikolajczak, Quoidbach, Kotsou and Nelis (2009). Basically, this is a slightly modified version of the already mentioned model by Mayer and Salovey (1997), but distinguishes identification from the expression of emotions, based on factorial differences (Parker, Bagby, Taylor, Endler & Schmitz, 1993).

The five competencies, identification, expression, understanding, regulation and use of emotions, were further divided into intra- and interpersonal areas. The test objects were partly derived from existing tools such as the TEIQue (Petrides & Furnham, 2001) and the SEI (Austin, Saklofske, Huang & McKenney, 2004). The final version of the PEK consists of ten subscales of the five test objects, which are grouped into the two factors intra- and interpersonal emotional competence and an additional global score. In summary, the understanding, starting from a multitude of revised definitions of EI to EC over the last century, has improved strongly. Due to the clear definitions and the distinction of the individual competencies regarding the intra- and interpersonal EC, it is easier to test them more specifically and thus investigate effects. The latter are examined in more detail below.

Effects on Emotional Competence

Below, the effects of EC on health, social behavior and performance are divided and explained in more detail.

Health

A meta-analysis by Schutte, Malouff, Thorsteinsson, Bhullar, and Rooke (2007), analyzing responses from 7,898 participants, showed a positive correlation between EC and better health. With regard to the burnout problem caused by increasing overload, various studies show a reduced burnout risk in individuals with increased EC (Brackett, Palomera, Mojsa-Kaja, Reyes & Salovey, 2010; Martins, Ramalho & Morin, 2010; Platsidou, 2010; Singh & Woods, 2008). Furthermore, it has been shown that there is also a reduced risk of psychological disorders (Hertel, Schütz & Lammers, 2009; Lizeretti & Extremera, 2011), and conversely, emotional competence is a negative predictor of psychopathologies (Gardner & Qualter, 2009; Williams, Daley, Burnside & Hammond-Rowley, 2010).

In addition, increased emotional competence (EC) has a positive effect on well-being (Extremera & Rey, 2016; Extremera, Ruiz- Aranda, Pineda-Galán & Salguero, 2011; Platsidou, 2010) and increased self-esteem (Gallagher & Vella-Brodrick, 2008; Schutte, Malouff, Simunek, McKenley & Hollander, 2002). Increased emotional competence is associated with health-promoting factors such as regular training, higher levels of physical activity, and healthy eating (Saklofske, Austin, Galloway & Davidson, 2007; Solanki & Lane, 2010).

On the other hand, increased emotional competence is associated with a reduction in health-damaging factors.

For example, Hill and Maggi (2011) showed that young adults aged 20 and 21 who had higher EC smoked less. In this study, it was also shown that occasional smokers had a higher score in interpersonal competencies. The authors suspected that social smokers were in this group (cf. Hill & Maggi, 2011). Similar results were found by Trinidad and Johnson (2002). A meta-analysis by Peterson, Malouff and Thorsteinsson (2011) showed a significant correlation between lower EC and more problems caused by alcohol consumption. The basis of the meta-analysis included 11 studies, 16 effect sizes, and 2,271 participants. One reason for the negative correlation could be a lack of socio-emotional skills to resist peer pressure (Trinidad & Johnson, 2002). Similar correlations exist with addictions in general (Kun & Demetrovics, 2010; Parker, Taylor, Eastabrook, Schell & Wood, 2008) and ecstasy consumption (Craig, Fisk, Montgomery, Murphy & Wareing, 2010). Regarding coping with stress, it has been shown that increased emotional competence has a protective effect on the subjectively perceived stress level (Mikolajczak, Menil & Luminet, 2007). Physiological and hormonal foundations for these subjective perceptions have been shown in other studies. There is a health-promoting influence on the stress hormone cortisol (Laborde, Lautenbach, Allen, Herbert & Achtzehn, 2014; Mikolajczak, Roy, Luminet, Fillée & Timary, 2007) as well as heart rate variability (Laborde, Brüll, Weber & Anders, 2011).

Social behavior

As early as the beginning of the millennium, Schutte and colleagues (2001) were able to identify some effects of social behavior and EC in seven students. Higher emotional competence was consistent with higher empathic understanding and greater self-control in social situations. Furthermore, greater cooperation ability and other social skills were observed. In addition, there was a positive correlation between EC and satisfaction in marriage (cf. Schutte et al., 2001). Similar results were found in another study. Participants with a higher EC score saw themselves as more sensitive to other people and therefore more social. This self-assessment was confirmed in reverse by outside observers in individuals with a higher EC score (Lopes, Salovey, Côté & Beers, 2005).

Further positive effects such as constructive communication or negative correlations between EC and damaging communication patterns in the form of mutual avoidance or refusal could also be identified (Schutte et al., 2001; Smith, Ciarrochi & Heaven, 2008; Smith, Heaven & Ciarrochi, 2008). The same could be found for preschoolers, where individuals with high EC had more social behavior and avoided negative behaviors. They were described by classmates as cooperative, less aggressive, and leadership-qualified (Mavroveli, Petrides, Rieffe & Bakker, 2007; Mavroveli, Petrides, Sangareau & Furnham, 2009; Petrides, Sangareau, Furnham & Frederickson, 2006).

Performance

The effects of EC regarding performance can be summarized in various areas. In an academic context, it has been shown that EC is negatively correlated with unauthorized absences and individuals with higher EC violate rules less frequently (Mavroveli, Petrides, Shove & Whitehead, 2008; Petrides, Frederickson & Furnham, 2004). Increased emotional competence reduces the likelihood of aggressive behavior in children at the age of ten (Santesso, Reker, Schmidt & Segalowitz, 2006). Parker, Summerfeldt, Hogan, and Majeski (2004) postulated a positive correlation between EC and motivation, through which students achieved better study performance over a year. The academic achievements shown could be explained by emotional and social competencies in 372 first-semester students.

When individual events of the academic year, such as an exam, are considered, increased EC can improve performance. The authors suspected better handling of negative thoughts during the exam, which could lead to better results (Laborde, Dosseville & Scelles, 2010). In another study, which examined students aged 8–11 years, emotional competence could explain some of the language and math performance (Agnoli et al., 2012). In a sports context, increased EC can be positively associated with satisfaction with the performed performance (Laborde, Dosseville, Guíllen & Chávez, 2014). The reasons for this include more effective stress coping strategies (Laborde, You, Dosseville & Salinas, 2012), more frequent occurrence of pleasant emotional states (Lane & Wilson, 2011), and better physiological resilience to stress (Laborde et al., 2011).

Furthermore, there is a positive relationship between EC and leadership skills in sports, which can be derived from interpersonal emotional skills (Magyar et al., 2007). In the research field of professional life, through which the construct of EC gained popularity and increasing dynamics in 1995 by Goleman, there are also a variety of effects and correlations. For example, Nelis and colleagues (2011) pointed out the importance of EC for a successful job interview. Increased emotional competence has a positive effect on dealing with stress during the interview and enables candidates to appropriately consider their own emotions and those of the executives. Increased emotional competence is also positively associated with group processes, effective leadership of groups (Côté, Lopes, Salovey & Miners, 2010), and leads to better decisions at work (cf. Hess & Bacigalupo, 2011).

In addition, increased emotional competence is associated with employee commitment (Gardner, Qualter & Whiteley, 2011) and leads to satisfied relationships with colleagues within the company (Mikolajczak, Balon, Ruosi & Kotsou, 2012). Increased emotional competence as a predictor of job performance was confirmed in a comprehensive meta-analysis (O'Boyle, Humphrey, Pollack, Hawver & Story, 2011). Based on different definitions of EC through the development of various test procedures, significant correlations between EC and effects on elementary components of life could be shown. It is therefore of particular interest to learn more about the trainability of EC (e.g. Campo & Laborde, 2015; Campo, Laborde & Mosley, 2016; Dacre Pool & Qualter, 2012; Hodzic, Scharfen, Ripoll, Holling & Zenasni, 2017; Nelis, Quoidbach, Mikolajczak & Hansenne, 2009) to be able to exploit the positive effects and minimize negative effects. Furthermore, this should be examined on subjects who experience a high degree of the mentioned stressors and demands in their daily environment. To ensure this, this thesis deals with traders in financial markets, so-called traders. The basis for understanding the special requirements of this target group is created in the following, based on scientific findings.

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