Trading as a Business: Part 1

Successful traders regardless of age, ethnicity or gender share a common trait; that is they all see their trading as a business. Unlike people who come into trading looking for the Holy Grail or a way to get-rich-quick, successful traders are in for the long run. They see and do things differently, and it comes as no surprise that they are still trading profitably when the masses crash and burn.

Why is it important to view trading as a business? Can’t it be a hobby or fun? Of course it can be a hobby or fun, but the problem with that approach is the lack of commitment to continue trading when the going gets tough. Like any other worthwhile endeavor, there will be peaks, troughs and plateaus of indeterminate duration in trading. The successful trader knows this, and will wisely prepare himself/herself mentally and strategically to handle whatever comes along. He/she will view trading as a business!

The Mindset:

Eleanor Roosevelt, the longest serving first-lady of the U.S.A and famous human rights activist, once said: “Everything worthwhile that I have done, scared me to death in the beginning”. There is no doubt that trading is a worthwhile endeavor - the satisfaction of beating the market and also the potential for financial rewards attract many. Yet, few get over the crippling fear that seizes most traders when they realise that without proper guidance and a trading strategy, they are ill-equipped to withstand the movements of the financial markets.

Upon realizing that the odds are well and truly stacked against them, and once real money is on the line, all kinds of strange behavior occurs! In the long run, the ill-equipped trader will either stop trading altogether or randomly take any trade they see irrespective of whether that trade is “good” or “bad”. Actually these traders have no way to gauge the viability of a particular trade because they have not adopted any trading criteria for measurement! In short, it is all a bit hit and miss, with actions dictated by fear and greed rather than sound logic. Compare that to a business owner who takes calculated and educated actions when growing their business. It’s very different, isn’t it? 

Traders who view trading as a business ARE business owners. They begin by setting goals so that they know exactly the outcome they’re aiming for. A useful goal-setting technique is SMART, i.e. ensuring that goals are specific, measurable, achievable, relevant and time-based. Also, these traders will seek to reduce risks by selecting the best trades only and by focusing on money management. There will always be risk in trading the financial markets, and traders who treat their trading business as a “going-concern” will do whatever they can to ensure that their risk is minimized so that they can continue to operate and make a profit.

Next – Trading as a Business: Part 2. We will talk about creating a winning trading strategy in this upcoming article. Stay tuned!

Regards,
The TWP Team