ALL traders want to be profitable.
But while all are mindful of their P/L, not all of them treat trading like it’s a business.
Some do it for the extra income, some like playing around with markets as a hobby, and some make it their part-time or full-time business.
Here are signs that you’re growing a trading business:
You have a mission-vision statement
You’re more likely to succeed if you know why you’re doing what you’re doing.
A mission-vision statement establishes what you aim to do and how you see your business’s future. It also helps guide your goals and execution down the road.
You have a business plan
What’s a business without a plan? And, no, “Buy Bitcoin and hold until moon” is NOT a business plan.
Your plan should answer specific questions like:
- Which assets will you trade?
- What (profitable) strategies will you use?
- What are your processes in identifying, executing, and journaling trades?
- What are your key performance indicators (KPIs)?
- What are your benchmarks for short and long-term success?
- How much time and capital will you allot before re-evaluating your business?
A business plan should help you fine-tune your goals, know when to make necessary changes, and focus on the most efficient use of your time and resources.
Your business is properly funded
While there’s merit in only risking money you can afford to lose, there’s also a risk with being undercapitalized.
On that note, you should also have a separate trading fund. Not only will it make P/L tracking easier, but it also protects you and your family’s vacation funds.
You have an edge
Having something that sets you apart from your “competitors” increases your chances of success.
Whether it’s an asset you’ve specialized in, your rock-solid discipline, or a set of trading playbooks, you have to have an edge that will make you consistent profits in different trading conditions.
You keep a strict daily routine
If you’re serious about growing your business, then you need to be around when the opportunities pop up.
This means showing up every day and maintaining a schedule for research, pre-trade preparations, trade adjustments, and journaling.
You’re mindful of your costs
You can’t optimize your operations if you don’t know where your expenses are coming from.
Other costs, such as opportunity costs (winning ideas you didn’t take because your capital is invested elsewhere), psychological costs (loss of confidence over a losing trade), and health costs (anything that knocks you out of your top decision-making form) should also be considered when refining your processes.
You recognize losses as a cost of doing business
Just like merchants make allowances for non-paying clients, product spoilage, and theft, professional traders also treat losses as a necessary part of the business.
The key is to keep trading losses small while maximizing profits and opportunities.
You’re committed to improving your business
Why make money from one trading strategy when you can profit from two or three?
You can start by paying attention to trading stats for improvement opportunities, learning from other traders, and investing time, effort, and money for skill and strategy development.
That’s it for my list! How many have you said “That’s me!” to? What other things are YOU doing in your trading business that’s not on the list?
Wednesday, October 2, 2019