Affiliations and Affirmations on Forex

2019.12.05 2019.12.05 Affiliations and Affirmations on Forex

Oleg Tkachenkohttps://www.litefinance.org/blog/authors/oleg-tkachenko/

Affiliations and Affirmations in Trading: Traders' Associations and Trading Psychology

Traders' Association: definition, types, advantages and disadvantages. Psychology of a trader: how to create affirmations for motivation and confidence.

Tell me, what would you prefer: individual trading in a warm, cozy home (although everyone there is on your case, including the parrot) or collective trading, where each team member is ready to lend you a helping hand? Traders’ associations seem more attractive in theory. Collective trading has its advantages, but the ideal team is utopic. In this review, I will examine the pros and cons of working in a team, and also touch on the creation of affirmations: how it works, how to construct them correctly and, of course, I’ll give you real examples.

Trading in a team and psychological trading system: how to feel at ease and manage yourself

Affiliations and affirmations. Affiliation is the desire to be in the company of other people, a person’s need to create warm trusting relationships, love, friendship, communication - all this falls under this term.

Affirmations are psychology-based statements, thoughts, internal dialogues that help designate goals and provide a motivational stimulus. For example, waking up in the morning and thinking: “I have to get up and exercise” is an affirmation, although barely, but the following phrase will motivate much better: "I will stand up (call to action) to exercise because I want to be strong and healthy”. Affirmations are not just phrases, they are motivating attitudes, and the result depends on how correctly the statement is constructed.

Affirmations and affiliations are not only related to trading, but apply to all life situations in general. In this review I will talk about:

• Collective and individual trading: pros and cons. Types of collective trading.
• Affirmations: why do we need motivational statements, examples of motivational phrases. How to create affirmations and why they may not work.

I hope you will find it helpful!

Associations of traders: pros and cons

Humans are social beings. We like to work not only because we are paid for it or for our career growth. We also like it because we get to meet friends, see their smiles, exchange news, just relax and distract oneself from the mess. Trading is a kind of freelancing, a type of employment where a person manages their own time and is responsible for their own decisions, as well as choose the place for their work.

For professional traders, trading on financial markets is their main job, and their workplace is often at home. Home environment is relaxing - this is sometimes an advantage. But when a trader is part of a team, where they can always consult team members or just relax, this environment also has its advantages. So what is better: collective or individual trading?

Team trading can include several formats:

• Teamwork toward a single goal. Example: investment company team that manages the capital of investors. Traders manage one or several investment portfolios, substituting for each other or responsible for their part of responsibilities.
• Teamwork on individual tasks. They work in one room, but everyone works for themselves. This format is popular at brokerage courses.
• Remote work in a team. A sort of hybrid format, by which I mean communication on trading forums, social networks, etc.

The team of traders can be both heterogeneous (novices and professionals) and relatively homogenous in terms of skills and capabilities. The second type is more stable, provided that there is no conflict of interest within the team. This form of cooperation can pursue the following objectives:

• Consolidating traders to accumulate capital. Traders in the team open a single account and accumulate funds on it in order to create an investment fund or meet the broker’s requirement for minimum deposit. Sometimes there are problems with the distribution of profits and control over the movement of funds on the account, so it makes sense to draw up a contract. It will at least protect your part of capital from a legal point of view.
• Combining the knowledge of traders in order to create unique strategies, scripts, or robots.
• Combining the capital of traders with the goal of purchasing something: historical data for testing (if they are not available for free), a subscription to analysis, advisors, etc. The goal is to reduce costs, which would be higher for an individual trader.

Collective trading has several advantages regardless of its form:

• Communication. Most importantly, it provides an opportunity to get advice, because it is highly probable that somebody else has been in a similar situation. However, sometimes advice will only confuse, especially when you’re not confident. But brainstorming is often useful as truth is born in a dispute.
• Startup opportunities. A trader in a management company manages third-party capital, which often exceeds their own. The responsibility is higher, and therefore the risks too. After all, the whole team will have to answer for the mistakes of one trader.
• Around-the-clock trade. This is an option for individual trading too, but a person needs rest, therefore there are limitations in the use of strategies. In a team, traders can substitute for each other. They can trade more instruments and use more short-term strategies. However, in this case you need to study the strategies of other traders.
• Solving workplace problems. Home is a place of comfort and coziness that does not quite motivate one to work. In other scenario, your family might disrupt your working process. Office is the place where nothing will distract you from work.

Collective trading disciplines and also performs a psychological function. In theory, trading affiliation should lead to a synergy effect: combining the efforts of several people can give a much greater effect (this is a situation where 2 + 2 = 5). The need to adhere to the schedule and the rules of the team keeps you in shape and supports healthy competition (the desire to be better).

Collective trading is tempting. Are you already thinking about becoming part of a trading team? Take your time to think it over, because there is another side to this coin.

Types of collective trading and its disadvantages

Alas, theory and practice don’t always get along. Everything described above is an example of an ideal team, which is close to utopia and extremely rare because of the human nature and the “laws of crowd behavior”.

Types of collective trading in real life:

1. Teacher and students. Team members are one trading guru and several newbies who want to make easy and quick money on Forex. They may not even be very interested in trading, but the though of easy money is too tempting. Nobody will accept novice traders to a professional team, so courses are the only chance for them to get into the trading environment. Such a team can be described as:

• not having a common goal (someone came to learn something new, and someone has no idea what they are doing there);
• having different levels of skills (someone at least has heard of MT4 and CFDs, and someone doesn’t know enough math to calculate the cross rate or trade volume).

It will all end in tears. A guru may pursue several goals: get paid for courses or promote a certain broker to students. As a result, the traders in the team get some kind of commercial product, which they will not be able to use, and those who try will lose money in the long run. Lucky few have a chance to get something useful, the rest will just lose time and money.

2. A group of professionals. This is a professional team, where each person has their own specialization: traders, marketers, testers, managers. Such a team may create new scripts and advisors, strategies, or this is an ideal management company team. They can develop PAMM or LAMM projects. This team has:

• coherence, discipline, and responsibility;
• common goals, corporate spirit;
• ability to negotiate with each other and a strong, charismatic leader.

To get into such a team, a trader must have unique knowledge. It should be useful to the team, and the team should be somehow useful to the trader. A successful combination of both factors is rare: professionals often work alone, and beginners find it difficult to prove their worth. Here we should mention the concept of prop trading.

3. A team of active beginners. The team consisting of traders who already know the basics and decided to join forces. For example, they met at forums or specialized events (maybe even at courses). Such a team has:

• poor understanding of what goals should be pursued;
• lack of experience and, as a result, attempts to work with different assets, strategies, etc.;
• democratic approach, where discussions in trying to solve a particular problem will take most of the time.

Over time, the team will divide into leaders, middle and weak members. The weak will be an obedient herd without their own opinion, the leaders will try to impose their opinion, and the middle folks will simply realize this is not their kind of team and leave. From a financial point of view, the result is poor. The best case scenario will be the formation of the backbone of the team and the emergence of the sole leader. But will they have leadership qualities and will they be interested in having a team?

4.Friendly team. Among friends, at some point someone someone might come up with a bright idea - “Let's trade together!”. This team is pretty much like the previous one with one exception: here everyone knows each other’s potential, which simplifies the interaction and identification of the leader. However, the problems remain the same:

• unwillingness to be responsible for collective losses;
• team diversity (different financial opportunities, knowledge, experience).

Often friends become enemies after having a joint business. Trading is no exception.

The problems of most teams, trading teams no exception, can be characterized as follows:

• Different levels of knowledge, experience and skills. Beginners will have a hard time in any team.
• Conflict of interest. It manifests itself in disputes, disagreements, violation of internal rules, etc. Most conflicts in a team arise from psychological differences and different goals.
• Inability to make a quick decision. Alone, a trader can do it intuitively, they do not have internal disputes in their head. Collective decision making is time consuming. In addition, everyone in the team seeks to avoid responsibility for the mistake, which might destroy the partnership.
• Different characters. Alas, such unpleasant things as envy, unwillingness to obey, irresponsibility are not uncommon in teams.

Collective trading = loss of money and relationships.

Brief summary. In order to trade successfully in a team, you need to find this team. The ideal option is the one where each team member clearly understands their responsibilities, where there is a friendly atmosphere, and each group member gets some kind of profit. Someone succeeds in finding that. But in most cases traders are individualists. The collective form of cooperation is more interesting for beginner traders. After gaining experience, they prefer to go it alone. Which option do you prefer?

Psychology of a trader: how to overcome yourself and make yourself work for success

One of the main advantages of collective trading is the opportunity to get support at any moment, including psychological support. In individual trading, the only assistant a trader has is themselves. They are their own enemy as well. Tell me, did you ever lose faith? It’s when:

• it seems like everything is collapsing, it is not going according to the plan;
• you are thinking about giving up trading and doing something else;
• you’ve lost faith in yourself and your strength.

In trading psychology there is a concept of affirmations. These are beliefs formulated as phrases, a sort of mantra that tunes you to a positive attitude. They allow you to keep peace of mind and remain cool in any situation. Below I will give examples of several such motivational phrases that may help you form a psychological trading system:

1. I am a successful trader. I will succeed in everything I want because I can set goals and achieve them:

• Only I am responsible for my happiness and success, the results of my actions only depend on me.
• I am always confident in what I am doing. I do not take hasty decisions. I succeed because I can analyze the situation objectively and make right conclusions, even if mistakes were made.
• I am always in harmony with myself. My emotions are under control, I am always aware of my actions.
• I know the key points of trading and know how to anticipate risks.

2. My goal is a stable profit. It means that:

• I am always self-confident.
• I enjoy what I do. No matter the result, I will still be satisfied. I don’t only enjoy the result but also the process itself.
• I have enough patience to wait out a dangerous period without opening a position.
• I am not chasing profits. I am interested in a stable income with minimal risks.
• I do not open trades for adventure purposes.
• I open a position only when I have analyzed all the factors and I am confident in my actions. Before making a decision, I always formulate the reasons.

3. I trust my actions completely:

• I like my strategy. I work according to a clearly worked out plan, even if intuition tells me what to act otherwise. I do not make groundless decisions.
• I do not give up the strategy if the resulting loss is within acceptable limits.
• I am ready to adjust my actions if the market situation changes.
• I understand that a clear adherence to the plan is more important than my ambitions.
• I analyze the market before making a decision. I do not open trades under the influence of emotions.
• I manage open trades. I understand that even if everything is done correctly, the probability of loss is not excluded.

4. I control the risks of each trade. It means that:

• I have calculated all possible risks and potential costs before trading.
• I do not use high-risk methods (for example, Martingale) to recover losses.
• I am ready to stop if the risks exceed the plan.
• I am willing to accept a loss. This will not knock me down and will not force me to abandon my long-term goals.

5. Only I am responsible for my decisions and their consequences:

• Only I am guilty of losses, and not anyone else. My mistakes are a reason to reconsider approaches to trade and to understand what was not taken into account earlier.
• I strictly adhere to discipline and do not allow deviations from it.
• Trading brings me not only profit, but also helps me to work on my personality and character.
• I do not worry after the decision has been made.
• I can assess my capabilities and set goals that I can achieve.
• I can manage my emotional state.

6. My decisions are not easily influenced by outside factors:

• I carefully analyze the fundamental and technical factors. I have the knowledge and practical experience. I know the situation. Therefore, I do not need any recommendations at the moment.
• I am ready to hear criticism only if it is reasoned. I am ready to defend my opinion.
• I try to ignore the “trade noise”: superficial judgments, redundant information in the media, etc.
• I do not get distracted by discussions in chat rooms and forums during trading.
• I will discuss issues with other traders only when I get a loss or I need a pause.

7. Trading is work for me, not a game:

• I use trader journals that help me keep records of trades, including their nature and results.
• I distribute the profits, using part of them for reinvestment and investing in other projects.
• I try to learn something new every day.

I could make up dozens of statements like this, but it’s important that they correspond to the trader’s world view and beliefs. The basic rule of creating affirmations is making them personal. As you can see, I use the pronoun "I" in each phrase. An affirmation must contain a call to action (“I will do”, “I will achieve”) or be of clarifying nature with a cause-effect relationship (“I do this because...”). You can also use the pronoun “you” if you make an audio recording with affirmations. It is not recommended to use the particle “not” in affirmations - in the psychology of trading, “not” is a symbol of denial.

You can do a simplified version of affirmations: write “I am a successful trader” on a piece of paper and repeat it as often as possible. You must believe it. When you repeat something dozens of times, you gradually begin to believe it on a subconscious level (this is how the psychology of a trader works).

There is a lot of criticism toward this approach to the trader’s psychology. Their argument is that there is no point in writing phrases and wasting time on repeating them, you need to act. Of course, it is easier to rely on a magic wand than to actually work. This opinion deserves its place under the sun too, because people are different and there is no single recipe for success.

Reasons why affirmations may not work:

• goals are too unrealistic;
• there is no sequence (connection between statements);
• incorrectly constructed phrases or incorrectly placed accents.

Maybe they are not working because some people just do not want to believe in self-hypnosis. However, here you can draw an analogy with religion: someone is an atheist, and for someone faith is something that gives them the strength to live. It’s totally up to you.

Conclusion. Trading is hard complicated work. Someone is willing to go it alone; someone needs the support of a team. Someone is betting on strategies; someone pays attention to their emotional state. Affirmations are tools that will help a trader both in individual and collective trading. After all, a positive result depends on psychology, planning, i.e. managing oneself and one’s actions. Building your own psychological trading system is the foundation of future success.

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