TREAT TRADING LIKE A BUSINESS
Starting and Running a Trading Venture Like a Business
Starting and running a trading venture as a business requires a set of principles and practices that are crucial for success. Let's delve into each of these principles more comprehensively:
1. Planning and Preparation
Funding and a Business Plan: Just as any business begins with financial planning and a well-structured business plan, trading should too. Calculate how much capital you need and how you'll manage it.
Realistic Goal Setting: Clearly define achievable goals that align with your trading strategy and timeframe. This is similar to setting realistic business goals in line with your business plan.
Cash Flow Management: Just as businesses focus on cash flow management, in trading, vigilantly managing your trading capital is crucial to avoid overspending and ensure you have the resources you need.
2. Avoiding Hasty Decisions
Resource Allocation: It's essential to resist the urge to spend your trading capital too quickly. Similar to not rushing into recruitment, purchasing excess stock, or launching lavish marketing campaigns in a traditional business, conserving your capital in trading is critical.
3. Long-Term Perspective
Planning for the Future: Similar to strategic planning in business, it's vital in trading to think beyond short-term gains. Create a trading plan that aligns with your long-term objectives, not just your immediate goals.
Avoiding Overestimation: In trading, be cautious not to overestimate short-term results, which can hinder your long-term success. Just like in business, don't let short-term wins cloud your long-term vision.
4. The Need for Education and Training
Trading's Complexity: Recognize that trading is not a simple endeavor, just as running a business demands knowledge and skills. Investing in education and training in trading is akin to the continuous learning and skill development required in business.
5. Diversifying Income
Maintaining Cash Flow: Similar to how many businesses diversify their income streams to ensure consistent cash flow, traders often supplement their trading capital with alternative sources of income as they start their trading journey.
6. Treating Trading as a Profession
Analogous to Entrepreneurship: View trading as a profession, much like entrepreneurship. It requires more than just theoretical knowledge; it demands practical skills, discipline, and a business-like approach.
Consistency Over Quick Gains: Understand that trading is about consistency and discipline rather than quick profits. Stick to your plan, which is akin to following a business plan.
7. Accepting Losses as a Cost of Doing Business
Incorporating Losses: In trading, losses should be viewed as a natural part of the business. Just as businesses anticipate and factor in various costs, traders should incorporate losses into their trading plans and risk management strategies.
8. Setting Realistic Targets and Goals
Goal Setting: Similar to how successful businesses set yearly objectives without taking undue risks, traders should define realistic trading goals that align with their strategies. Setting unattainable goals can lead to unnecessary risks.
9. Investing in Education
Knowledge Gaps: If you have knowledge gaps in trading, consider investing in education and training. Successful businesses prioritize learning and development, and traders should do the same.
10. Resource Investment
Facilitating Growth: Invest in resources that facilitate the growth of your trading business, such as trading software, tools, utilities, and hardware. Recognize that trading, unlike many other businesses, often has lower overhead and startup costs.
Paid Resources as Business Costs: If paid resources can enhance your trading and lead to better results, consider them as a necessary investment in your trading business, just as businesses invest in tools and resources to improve their operations.
11. Transitioning from Hobby to Business
Avoiding Expensive Hobbies: Continually treating trading as a hobby can lead to unnecessary expenses. Transitioning to a business mindset ensures a more disciplined and cost-effective approach to trading.
12. Profitability Through a Business Approach
Natural Profitability: Applying a business-oriented approach and following principles that drive successful enterprises can naturally lead to profitability in your trading venture. Just as businesses aim for profitability, so should traders with their trading business.
~MS
Founder, MARS EQUITY