Desensitizing a dog is a relatively simple process, although it may take some time to accomplish. Start with a piece of cherished food in one hand. It has to be something your dog is wild for. Don't be shy here, a biscuit isn't adequate. It has to be special - only given in these sessions. It has to be spectacularly enticing. Your dog's eagerness for it will help him overcome his fear. Hold a small piece of treat in your hand, in front of his nose. As he's sniffing and licking it, slowly raise the other over his head. If he accepts this without worry, give him the treat. Use lavish praise anytime your dog shows confidence.
If he is anxious any time you stand near him with your arm up, try kneeling or sitting on the floor at first. Few dogs have been abused by a kneeling or sitting person so they won't fear these positions. Make sure you keep talking to the dog in an enthusiastic voice throughout.
Repeat this procedure, slowly increasing the speed with which you raise your hand. Once he tolerates this without a flinch, move to the second level. Now, do not hold the treat to his nose. Instead, while you are a step or two away from the dog, raise your hand slowly over your head and slowly step towards him. As you near him, give him the treat with the other hand while you lower the raised arm down to stroke his head. Praise him enthusiastically!
A little trick that helps a shy dog is to back up a step or two every time he takes the treat. Not only will your retreat give him confidence, but it releases any stress he may feel being close to you and allows him to approach you again for the next round.
Over many sessions, increase the speed of the hand raising and the step toward the dog. Always follow this with a treat and much praise. Your dog will learn to have no fear of you or your hand motions. Stay relaxed. This type of training takes as long as it takes. Some dogs will relax completely in two weeks, others in two months. It's not a race.
Dogs who make no progress after several sessions need the help of a professional trainer or behavioral counselor. Dogs who are movement sensitive in general need to be carefully socialized with children and always supervised. They have experienced the worst that humans have to offer. Don't forget that: because they won't. With these dogs it is always better to allow them to approach a person rather than having the person approach them. No approach, no interaction.
Never soothe or console a dog for showing fear. Phrases like "It's okay" only make his fear worse. Instead of making him feel better, you'll actually be rewarding fearful behavior. Anything you reward will happen more - not less. Instead, act the way you want him to act, reward him anytime he shows confidence and you'll see more of it.
Your dog looks to you for guidance. A simple rule is this: Your dog reflects your emotions. If you are happy and confident, he is more likely to be also. If you are worried and anxious, he is more likely to be that too!