Today I'd like to welcome Brian McAboy from InsideOutTrading.com. Brian is a well known and respected trainer of traders on how to turn and focus their trading into a business. Today he's going to give us some insights. As always he's ready for your comments and questions. Be sure and check out InsideOutTrading.com.
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When it comes to business & investment pursuits, trading truly is a great business – but only if you treat it as the business that it really is. Most traders get around to this after taking several financial and mental beatings, but it when you finally do, the rewards are great.
Where most traders go wrong, starts at the very beginning of their trading careers. They see trading more as a simple way to make some money, rather than a real business – and they pay a steep price in both financial and personal terms for this error.
Remember when you first heard about trading? It sounded relatively straightforward and potentially very lucrative while offering many great benefits: no employees, low barriers to entry, relatively low startup capital, just to name a few.
It didn’t take long though to discover that it isn’t quite as easy as it seemed at first, did it? There are hundreds of choices to make and the possibilities seem almost endless.
Now because trading is often presented as ‘easy money’ and not a real business, it is quite common for new traders to just jump in with live trading thinking that if they can just start making some money with it, everything else will fall into place. Either that or they just aren’t considering the challenges of making that money consistently over time.
When you approach trading as the business that it is, you realize several truths that make life easier in making a success of the endeavor. You also realize several significant benefits and advantages that otherwise would elude you.
First of all when you mentally approach your trading as a business, it has an entirely different look and feel. Many traders view trading as their future and for some, it even becomes their identity. When it is your business though, you remain detached to a degree because it stays separated from you, an activity in which you participate, a business that you own – while you keep your identity whole. The feelings will still be strong, but at least some separation and needed detachment are there.
Secondly, without an entrepreneur’s mindset, the whole activity of trading gets organized only to a limited degree. For those with the ‘easy money’ view of trading, it will only become organized and structured to the extent that you can get started. When approached from the view that it is a business to be built, much more detail and forward thinking is brought to the matter, giving realism and proper perspective that otherwise is absent.
The third advantage, is that of structure and patience. You know that businesses are not built overnight, so the expectations from the onset become more realistic and thus more manageable. If you are looking to ‘make lots of money fast’ instead of building a business, you will have disappointments and frustrations due to the unrealistic expectations not being met.
You avoid tremendous opportunity cost. Every month that goes by that a trader continues to trade for little or no profit represents an opportunity cost because their time has been spent and investment capital tied up when it could have been generating a return elsewhere.
Probably the greatest advantage to treating your trading as a business is that of compressing the time to profitability. When approached realistically from the proper viewpoint that trading is a real business, this causes you to properly plan your business, thinking through most matters that otherwise only get addressed as errors are made. The most common denominator among failed traders and failed businesses in general is the lack of a business plan.
Go to any bank, angel investor, or venture capitalist, and tell them that you have a great idea to make money. Then, tell them that you have no business plan. They will tell you to go away, without giving you any money or even the time of day – because they’ve learned over decades that without a business plan, your odds of success become about 10%. They also know that even if you do eventually succeed, your time to profitability will probably be unacceptably long for them to get their money back.
Another way, and probably the one with the greatest impact, in which the business approach gets you to profitability faster is that with a working plan in place, you will avoid the many detours and wastes of time and resources that can too easily occur without it. How many traders do you know that have tried several different markets or at least different systems, yet still are not making the money they want? This is but a small illustration of the savings of time and capital.
Brian McAboy
If you’ve enjoyed this article, feel free to watch the video presentation “Trading As Your Business” which expands on the matter by going to this link,
Very sound article!
Thks for the highlight!
Great concept... I always joke around that my part-time business is trading, after my day job. Perhaps it's not a joke... I know my profits have been consistent and realistic.
I´m relatively new to trading [only on a mini basis]. However, I anticipate changes in the next few years that will most likely lead to a career change. Learning, selecting strategies and putting together an effective plan will no doubt increase my level of success as a trader. I have no doubt that the services provided by InsideOutTrading would be of great benefit. Why would I try to figure this all out, when you have acquired this knowledge over years.
Your article makes me think deeply about my own trades.
Maybe it is better to treat it like business, hoping to be able to generate small but consistent income over time, rather than jumping at potentially high profit opportunities but accompanied with substantial risk.
Thanks for the excellent article.
The attached article was sound, articulate, and just made sense.Your ensuing videos were well presented and
and again sensical.
Keep up the good work.Maybe you'll nab this 57 year old professional investor as a student.
Milt Misogianes, PhD
"The more the merrier", only applies if there are enough opposing traders to give you what you want. If there are very few sellers and I have a strong buy signal to execute then I am not going to get much of a reaction when I pull the trigger. That's what we see on one way days. There is no opposition. Consequentley the volatility dries up and we get one or two good pops in the same direction. Then the market just sits there going sideways for along time, waiting for some important news to come and move it.
The more the merrier applies if you catch a bottom (or top) before the herd piles on and drives your trade for you.
Another key is the lack of set plan. At the corporation I work for, they have a set plan for every month, a goal, a realistic one. Before the days of the new corporate accounting rules we used to "make the month" and then shift off the orders to the next month. IN that same way, a trader should "make the week/month" and simply stop or at least scale waaaay back.
Overtime just as a business knows it's market and which months are hot and which are cold, the trader must come to know when the market is good for his strategy and when it is not so goo. Scale back on the bad times (trade smaller) and then scale up when things are blowing in your favor.
Later, just like an expanding business, the trader can launch a new strategy just like a business comes up with a new product, to smooth out the returns and diversify.
The trader, like the entrepreneur, needs to accept the fact that the failure rate is 90%. Confront why most fail and don't do those things.