I’ve got good news for you. If you’ve been struggling to get the results from your trading that you expected, then you’ve probably dismissed the most important thing, and it’s such a common mistake that struggling traders make and the pros don’t: treating your trading as a business you own, not simply something you do.
If it’s so simple, then What does that actually mean?
Let’s take a closer look and see.
While most people know the difference between a hobby and a business, most who aren’t profiting from trading fail to see that they are approaching their trading in the same way they would a hobby, instead of a business.
Hobbies are activities where a person has an interest and they enjoy the activity itself. It’s fun, exciting, enjoyable, and occupying. A hobby is part-time, do-it- yourself and a learn-as-you-go activity.
Unfortunately this is good description of trading for many people, except that they don’t recognize it as a hobby. For most traders, trading is an activity that they simply pour money into, not make a profit from, and it stays in the expense column of their financial report.
A business is an activity where the underlying purpose and everything involved is to make money and show a profit.
There are certain requirements for anyone to go into business, as a business owner.
First of all, you have to have a decent head on your shoulders. Not just anyone can trade, it takes money.
How did you come by the money to trade? You had to be smarter than average.
Perhaps you’re a high level manager, maybe a business owner, or successful professional. Regardless, the markets are not where the average or below average person can be. If you can’t show up with several thousand dollars, you simply can’t trade.
Just by being able to play the game, you’ve shown that you can amass a respectable sum of money, which takes being smarter than average.
Secondly, a business owner has to have reasonably developed management skills for managing the day-to-day operations, the money inflows and expenses, the exposure to risk.
In trading, risk management is at the core of the business. Not only making sure that every trade is properly balanced with regards to the risk involved on any given trade to the potential reward, but the exposure to risk of the account as a whole is critical.
Too many traders put too many eggs in too few baskets, and with the uncertainty of the markets, it is imperative that the trader fully understand and manage risk so that the business will survive any downturns and keep the doors open next month and next year.
Thirdly, the smart business owner understands the necessity of a team, a solid support staff.
Any business that is a one-man show is destined to limited success at best. Quite often, the story doesn’t have a happy ending. The number of hats that the owner has to wear involves too many, non-income producing tasks and time is not spent where it should be.
The most critical person to have on your team in a business is an experienced mentor and counsel. Any successful venture starts with a solid knowledge of the industry and the markets that are served. The inner-workings of that business and what mistakes to avoid, plus a deep understanding of what the real profit centers are, and the true potential liabilities, the risks involved, must be understood going into the business.
That is what a good broker can do for traders: provide the expertise and experience to tell the difference, and guide the trader to real opportunities, while safeguarding against dangerous situations and decisions that can ultimately ruin the profitability of the business.
Lastly, and most importantantly, traders need to recognize that they are people, and all that goes with that. They’re not computers where a new body of knowledge can just be loaded from a CD. It takes time to absorb information and develop skills.
Humans also have feelings. While knowledge is power, it is so often over-ridden by emotions that unless one develops a level of emotional control, the emotions that come into play when trading will cause a variety of poor decisions that cause substantial losses.
Success in trading first comes from recognizing that trading is a business. It is an activity where ignorance, inexperience and emotions are the biggest liabilities and the greatest risks.
By first locating a good broker for guidance and mentoring, then constantly devoting time to personal and professional development, especially practicing and developing particular skills, a person will give themselves the best odds of achieving the end-goal of having a profitable trading business.
Article Source: EzineArticles