Many of us have been taught that trading is a business. Yet, some could be left confused because most traders may not have business ownership experience or never intended to own a business in the first place. Therefore, the idea that trading is like a “business” remains theoretical to many and the important lessons that the comparison implies are never really understood. In this article we need to find what are the components that define trading as a business without all the hype of “no employees, no boss, trade whenever and wherever you want…”, etc.
[bctt tweet=”Trading as a Business for the Non-Businessman #futures #trading #ES_F “]- Trading is not a franchise. The goal of a business is to make money. That means that you must do whatever it takes to become successful and sacrifice as much as possible in order to learn your business inside and out. Money is a by-product of effort and it is often referred to as the score of how well you are doing. Furthermore, the ability to withstand certain risks that most other people cannot digest is a daily constant companion to traders.
As a trader you must learn, or build, a method that will make you successful as a result of mastering it. Trading is not a franchise that you buy with a key-turn operation and a set of instructions that make success a very likely outcome; instead you are building your own foundation from scratch and your trading rules, principles and all components of your strategy have to be adjusted based on your needs and personal attributes.
- Inventory and fixed costs for traders. Trading has its own “inventory” and that is the price of paying for various educational trading programs or trading mentors until you find the one that suits you the best from the standpoints of capital, time and simplicity.
Some traders spend tens of thousands, some spend very few money and other follow the do-it-yourself approach and pay their tuition directly to the market. Nevertheless, it’s very unlikely you will hit it right with your first course the first time around, because trading successfully is a process and it requires time.
Later, your other costs can include reliable computer equipment, a trading platform and a good data feed provider that will deliver your trades in the fastest fashion possible. Commissions and the slippage are an additional cost as well that will be part of your overall equation and the amount of money you are willing to risk on an individual trade (defined by the amount of contracts and your stop loss level) is often referred to as the ‘cost of doing business’.
- Barriers to entry.On the surface, there is little or no barrier to enter into the world of trading which often provides the wrong implications about the difficulty and the nature of trading. Under the surface, you are up against some of the smartest minds in the world and firms which use the most sophisticate computer software which cost hundreds of millions. For individual traders it is often not easy to survive against the professional because of inferior trading methods, outdated strategies, the lack of basic market fundamentals, let alone the mental side of trading and the general approach.
We suggest, learning how professional traders look at the market, how they use position sizing and what they do differently from the rest of the crowd. If possible, imitate them as much as you can to become a better trader. In other words, learn from those who are or have been successful, and not from those who are not. Let others make the costly mistakes so that you don’t have to do them again.
- Business cycles.All business will go through ups and downs and, inevitably, so will your trading. You could have great periods and there will be days where you will doubt your skills. But, this is a natural course of things and this should not discourage you and not lead to wrong assumptions about your system or abilities. A good businessman will think how to improve his/her bottom line during such periods, and what steps could be taken to make proper improvements as they are needed. A professional always thinks process-oriented and avoids the result-oriented mindset.
Quite often, as a trader, your losing periods can be a reflection of how to improve your strategy and may reveal weaknesses of your method, your psychology or other aspects where you lack professionalism.
- As opposed to many businesses where you can consult with other professionals in the same niche, trading is a lonely profession to a large extent. You will have to depend on yourself most of the time, take full responsibility for your action and quite often listening to others will not make things better and can even lead to wrong assumptions and decisions when trading strategies differ from each other.
We are surrounded with trading forums, blogs, and a GAZILLION paper traders who are just full of advice, but lack practical execution. Make your own decision, live and die by your own skill.
Do you think there are other variables to trading a business? You can discuss below.
THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES TRADING. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. YOU SHOULD CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR CIRCUMSTANCES AND FINANCIAL RESOURCES
Suggestion: Trading is a business, and cost is a factor. You have the ability to choose among FREE trading platforms. Consider a number of Futures Trading Platforms that are provided to you FREE of charge: OEC Trader, Multicharts .NET and R-Trader From Rithmic.
