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Approaching Trading Like a Business

Objective: In this topic we cover some of the benefits of approaching trading forex as a business. The long-term benefits of learning to trade well are great, so it is worth the effort & discipline to take a thoughtful approach.

Trading forex is possibly one of the best businesses in the world to be in. Some of the many benefits of learning to run a successful trading business include:

You can run the business from anywhere in the world with just a laptop & and a cell phone.
There are no employees to manage, little paperwork, and no customers to deal with.
You can largely choose your own hours, and have the flexibility to take time off.
Very low setup costs and the ability to use leverage and compounding to grow your business.
In forex you get to think with a global perspective while staying up to date with international affairs.
The trading business is one that you can continue to get better at and do for a long time.

All that being said, trading is still a business and should be treated as such. Essentially as an independent trader, you are managing your own trading company. And like any business the goal should be to run it well, keep an eye on risk, manage cash-flow, and grow it. Ideally you should also enjoy trading and have an interest in the markets.

Know Your Competition

Trading is as difficult, in some ways more, as any other business. And in trading forex there are almost no barriers to entry so the competition for profits is very high. Take this along with the fact that we are competing with the largest international banks & institutions in the world. Have a look at some of the other traders you are up against:

This is the main trading floor of the Union Bank of Switzerland (UBS), where around 1,500 traders with 2,000 computers along with 5,000 monitors trade the markets, including forex.

Do you think you can come to this market and compete without any consistency or discipline? Do you think you will be able to just place random over-leveraged trades and still beat these guys?

We are competing with some of the biggest, smartest, and best traders in the world... think about that before going out and buying some $80 EA system that guarantees you can achieve easy riches!

It is a mistake to think succeeding at the trading business will be easy. Many new traders come to forex thinking they will get rich quick, experienced traders know this is not true.

You have to be more disciplined and manage your capital better than the majority to make money. However this also is a clear way to gain an edge on the market. Those that can trade with discipline, consistency and treat trading as a business, often will have an edge over those that give their capital away every day from trading on emotion & risking too much.

Some Points to Keep in Mind as You Approach Trading as a Business

Thinking about trading more as a business, as compared to a gambling or speculation, will help you to think more strategic and deliberate about your trading. It is a good idea with any business to have a strategy or plan, you should also have something of this sort with your trading business. However, also keep in mind your plan does not need to be overly complicated. It may just consist of one page of guidelines that you can refer to that sums up your general strategy & approach.

You often will need to give a strategy time to work, but also just like any business plan it may be appropriate at times to make adjustments, the same is likewise true for your own trading strategy. So it is a good idea to keep a simple notebook recording your trades and lessons learned. This will help you be more systematic with your approach and will also help keep you away from repeating the same costly mistakes!

Also keep in mind that most business's take time to succeed, no business is a success overnight. Likewise often it takes traders many months and often years of trading with discipline to start trading well. This is a strong reason why it makes sense to be more conservative with your risk exposure, especially at first. Trying to go for 100-200% returns greatly increases your chances that you will ruin your account and have to stop trading.

Become Skilled at Managing Cash-flow

Successful traders often do not have any superior strategy or approach than those traders that fail. The big difference is they know how to manage & preserve their capital even while taking regular losses. Taking losses is part running a trading business, it does not need to be anything more than that. You just need to manage your losses well, especially during times when the market conditions are not suitable for your particular strategy.

For example a gas utility company in Iceland may have low or no profits during the summer when demand is low, then have nice profitable months during the winter after gas demand has increased. The same is true for trading, any strategy or approach will have times when the market is not favorable for that strategy.

All markets move in cycles and have times of various volatility, sometimes they will be trending, sometimes they will be moving sideways. During times when your strategy is not producing profits you must continue to manage your risk and your cash flow so that you can be there when favorable conditions do arise.

In trend trading for example, there will often be times when the market is trading sideways and it is very difficult to extract profits, and the strategy will experience losses and drawdown. Just think of it as a slow time of business, don’t get impatient and start to overtrade, just wait and know when it is time to go back to work.

With Good Money Management & Patience You Can Succeed

Leave behind the "get rich quick mentality" and start treating trading like a business. And keep in mind there is some good news in all this, and that is the simple fact that you can make a lot of money in not much time, if you can earn steady returns of 20-30% per year, starting from almost any account size.

The Forex market offers great opportunity, what used to be reserved only to large banks and high net worth individuals, is now available to anyone with an internet connection & a little start-up capital. The potential for profits and growth are large. However the risks are real, trading in many ways is can be simple, but it is not easy.

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