In this article we explain why trading has to be treated like any other business in this world regardless of trading part – time or full – time.
Treat trading and investing like the business it is!
Trading and investing in the forex, futures and stock market offers amazing and beautiful opportunities to make money with great side attractions like flexible working hours, working at your convenience and the pride of being successful at an endeavor many have failed at. A large percentage of people still fail despite the excitement they start with. Immediately this occurs, they blame everyone, and every factor involved, ranging from their broker to the market and every other thing involved except the trader themselves.
Isn’t it funny that everyone and everything is to blame except the one making the trades? Trading and investing in the financial market is a profession and must be taken seriously as one. People do not usually understand the level of seriousness it entails because they are going about it the wrong way. You want to master a profession and create a constant flow of income from it, while you manage all the aspects of it, this is precisely what a business is.
Trading forex, futures, and stocks are not a fun trip to the casino where you count on luck to pull you through. Trading is a serious business and can never be treated as a hobby. Why would you even treat managing and multiplying your resources as a hobby? How can the activity that would sustain your family and future generations be a hobby? It is irresponsible to treat it as such.
As a forex, futures and stock trader, it is crucial you understand that the point of trading and investing is for you to make profit and you can only make profit when you are consistently making more money than you lose. If you lose money at a faster rate, then your business will be running at a loss, and you will eventually blow out your starting capital without anything to show for it.
Similarities between forex, futures and stock trading and business
Starting a business involves some necessary logistics and analysis. If you are starting your business, the goal is to be able to maintain a level of consistent profitability, and you don’t just start and hope for the best. You make plans and future projections; trading should be treated in this exact way. Entrepreneurs have to come up with solid business plans, unique problem-solving abilities, look for team members that can fit into the team and increase productivity, but trading is a one-man show, and it is easy to forget the preparatory stage, and that would be diving in headfirst.
It is effortless to start forex, futures and stock trading. You need to set up accounts and fund it, and just like that, you can begin. A few smart traders go through the preparatory phase and plan for success. They are prepared for long-term success and to be real entrepreneurs. Here is how trading and investing can be likened to a business operation.
Plan to Win
Every business has a solid business plan which entails how the day-to-day running of the business is done, and this also guides the decision-making process. The business plan is continually revised and changed based on discoveries and factors. Every forex, futures and stock trader should emulate this pattern and have a written trading plan. The trading plan is continuously upgraded and improved based on experience and past results. The trading plan is used to make trading decisions, and the outcomes are documented for constant evaluation and further decision making. You continue to backtest it and optimize it.
Your feelings are not involved
As the CEO of a company, your decisions are based on facts, not whims or feelings. You don’t fire your workers because you are bored, and you want to stir up drama or employ new people because you feel like seeing new faces. There are steps and procedures for every decision you make, and it is guided by a business plan and facts.
As a forex, futures and stock trader, you do not trade because you are bored, and your fingers need to press something. There are various emotions associated with trading like greed or fear, and it is perfectly normal to feel all these. This exact reason is why you have a trading plan; if a trade doesn’t fit into your trading plan, you walk away from it no matter how good it feels
You keep upgrading and polishing your trading plan until it is tried and trusted.
Expenditures involved in doing business in the financial market
Certain costs are unavoidable for you as a forex, futures, and stock trader. A businessperson would probably need to pay for office space, pay workers, and get equipment. A trader has some bills that need to be taken care of, and the primary thing you consider as a believer is to make sure that your profit is above your expenditure. Some cost that you might not be able to avoid as a trader are:
- Lost trades
- Laptops or Hardware
- Broker’s commission
- Other office equipment
I know a lot of us are hoping for perfect trades where we incur no loss, and everything is all perfect, but that is very much unrealistic. Incurring losses is part of trading, and the best you can do as you gain more experience is to reduce the losses you get and maximize your wins. The laptop or computer you are going to use, and the software you are going to install are all part of your expenditure. Paying your broker is equally not optional.
These are the major expenditures, but some other ones might come along the way, but the important thing is to ensure that your wins can pay for all these and you still have some left, and that is your profit.
The profitability of trading forex, futures, and stocks
Many factors go into making forex, futures, and stock trading profitable, and it would be impossible to explain all of them here explicitly, but there is a general knowledge that we share at our online trading academy ant that is basically to make sure your wins are significantly bigger than your losses. There is one way to ensure this.
- Ensure your winning trades offsets your losses at least 1:2 (risk to reward ratio)
Most people assume professional traders win up to 80% of their trades, which isn’t so. Professional forex, futures and stock traders have only learned to harness the power of risk to reward ratio. Which means they only have to win about 30% to 40% of their trades. They have come to understand the power of risk to reward ratio, and they now know that they don’t have to win every time to make money, they just have to ensure that their wins offset the losses by a substantial margin.
You also need to realize that you don’t have to be right all the time to make profit. It is okay to be wrong more than you are right, but you need to master the risk to reward ratio and how it works perfectly.
The significant difference between trading and other businesses
In business, when you discover a market, you get the necessary skills and continually develop it until it has the edge over everyone in the field. Then you can conveniently market it and make money. You have to be disciplined and focused, and patient in a real business. The exact principles also apply in trading forex, futures, and stocks. It would be best if you were committed, hard-working, and very diligent as a trader.
As a forex, futures and stock trader, you need to be confident in your trading, but you also need to understand that you cannot force the market. The way the market swings or moves is entirely out of your hands, and the best you can do is to identify how the market is moving by using Supply and Demand imbalances and decide if it is to your advantage or not.
You run your trading business within the broader market, but what happens in the day-to-day market movement is entirely out of your hands, and you can only learn to trade it to your advantage. You can’t leave your trading success to hope for a lucky trade or tip. It would help if you had a trading strategy like Supply and Demand that you can consistently work on to optimize your resources and study the market.
Building your trading business
The primary characteristic of unsuccessful traders is the search for shortcuts or cheat codes, and they don’t want to stick to anything or put in the work. They just want some magical formula to catapult them to success. Successful traders, however, understand the need for commitment and diligence.
Developing and continuously improving your Supply and Demand trading strategy takes out a lot of the uncertainty and reduces the anxiety involved in trading drastically. You will, however, continue to improve on your trading method and sharpen your skills with time.
Once you have successfully developed your Supply and Demand trading strategy, you now need to discipline yourself to only trade opportunities that are in line with it. A lot of people advice trying different methods, but that is crap and unrealistic.
At our online trading academy, we will teach you how to develop a dynamic trading strategy based on Supply and Demand and how to use it to your advantage. When you master how Supply and Demand trading works very well, you will start to enjoy trading, and it would become fun for you.
If you want to learn more about professional trading and investing across multiple asset classes such as forex, futures, and stocks, please sign up HERE for free at our online trading academy www.onlinetradingcampus.com and get access to a free three-hour introductory course.
Author Bio: Bernd Skorupinski teaches the undiluted truth about trading and investing at Online Trading Campus and takes you through what it takes to be a consistently successful trader. His favorite moment as a trading mentor is the way peoples’ eyes light up with excitement and confidence when they understand how Supply and Demand trading strategy works and how it can help win in the trading arena. He believes in building core values and discipline that ensures his students do not succumb to the pressures and temptations of the market. He very much believes in following plans and strategy through. If you want to know more about the author Bernd Skorupinski please read HERE