Is Your Trading Account a Business or a Hobby?
4 Critical Lessons to Grow a Sustainable Trading Business
Many answer the call, few do the work,
The sexy title of trader is fascinating, especially in the age of TV personalities who were traders first. They represent the image of what we want to do and be.
Imagine signing a lease on a new office and making a few sales this week. You had a good week so you decide to double your office space, which of course doubles your rent.
Sounds crazy right? What does this have to do with you?
Time and again I would see traders doubling the size of their positions without a long-term track record of success. A common question is “how long would you consider?” Let’s start with how a public company reports; quarterly. How many quarters in a row can you earn a profit to justify your performance. You need a few of them at minimum.
Prove you can earn money before you trade bigger. Treat your trading like a real business.
To give yourself the best chance to succeed, you must be honest about your resources so you can start on solid ground. Starting with $10,000, no experience and no training but believing you will earn six-figures is a fantasy. A good one, but still a fantasy.
It takes time to learn how to not lose money. Then it takes time to learn how to make money. In my years as a mentor the trader’s journey never changed. It can’t. You need to learn what to do. When not to trade and when to trade with more leverage.
Before you hit the buy button you should have these rules written down in your swing trading plan. If it’s a real business to you, it will be a priority for you and you have a chance to succeed. If it’s a hobby, you will find yourself looking for a new shiny indicator each week.
The following lessons were designed to help you build the solid foundation we mentioned…
When you think of Henry Ford what comes to mind?
Automobiles of course! A huge part of Ford’s success was the systems he put in place; the assembly line, the car dealership model.
What about McDonald’s? Another iconic company that developed systems to produce consistent money. Your trading system is your set of rules and procedures for giving yourself the best chance for repeatable success.
“Teach me how to make money.”
This is rookie talk. Good trading is about risk management and probabilities.A swing trader who earns money consistently, manages risk first and learns how to hold the winners second. It can’t be any other way, you will have losing trades. The journey has repeated since trading began, minimize risk until you finally understand how to make money.
You need to trade to learn how to trade, but you need to last to learn how to make money. This is where risk management is your new best friend.
With risk management you have a chance, without it kiss your capital goodbye. I have seen rookie traders lose their entire account in one trade. Real money. Poof. They didn’t listen. Read more to discover what you want to learn.
Practice, practice, practice.
Trading a demo account is a waste of time or a necessary tool. It depends on which side of the fence you sit. Those against say you aren’t learning because there are no emotions tied to the fake results. The side in favor of it see you as learning what to do without risk.
The truth is they are both right. The problem with the argument is you can’t put a blanket on the question. New traders should not use a demo account to gain confidence, as most mistakenly do. “I don’t understand why trading live will be different.” is the common phrase. Yeah, and your skill in Grand Theft Auto is how you will feel when you steal your first car and drive 150mph. Easy peazy, eat my dust coppa…
Demo trading is about getting in your repetition. It’s about training yourself to follow your plan. It’s not meant to pay the bills. It’s a terrific tool for new traders.
I keep saying new traders because experienced traders can learn little from trading a demo. They would be better suited to learn how to back-test if they are testing a new system or in a slump.
Continue reading for the areas of focus when practicing your trading…
Serious traders use real tools. If you are sincere that you are running a business you will not skimp on your tools.
Your trading hardware (computer) and software (execution, quotes and charting platform) must be reliable to operate a fully functioning business.
Read my recommendations for the minimum requirements and learn how to get our partners at Tradestation to pay for your Edponsi.com education.