Trading As A Business

Trading is a business and should be approached as such. There are costs associated with learning to trade and with actual trading. An individual should carefully look at this before venturing into trading. Taking a business approach and doing some planning in this area will help you evaluate the associated costs. We take a look in this section at some of the costs that are associated with trading. We also look at extending the trading plan to incorporate an annual business plan for those traders who are ready to move into that area.


Trading Education

 

 

Although there are exceptions, learning to trade at a level of profitability to make a living will require a solid trading education and time. It can require a considerable amount of money to explore many types of trading methodologies before traders find one that suits their personality that they evolve into their own unique trading style.
It would make sense for traders to formulate a plan around how they want to approach their education in learning to trade. There are many ways to explore learning different methods of trading, including:

• Live workshops and seminars.
• Trade shows.
• Books, magazines, and newspapers.
• Web sites.
• Live trading rooms.
• Mentoring and tutoring programs.
• Newsletters

It is likely that over the course of a learning curve a beginning trader will explore several of these categories in combination. The trader should investigate each and evaluate the cost and possibly plan a budget around this. For instance, the trader may decide to set aside $3,000 to $5,000 the first year to use for expenses associated with a trading education. It could be allocated to attending a live workshop or seminar, joining a live trading room, studying books, and taking out magazine subscriptions. Each year the education costs can be reevaluated based on where the trader is in the learning curve and what education is needed at that point.

If the trader chooses to attend live trading events, there will most likely be travel costs associated with those events that should also be taken into consideration. One such trading event is the Dukascopy forex event.

We are often asked, “How long will it take to learn to trade successfully?” This is not a question that can be answered with any specific time frame. There are many variables to be considered, such as:

1. The amount of time the trader can commit to learning, studying, and practicing trading.
2. How well the trader can outline and follow a trading plan.
3. How much previous experience the trader may have; this can either contribute to or take away from the learning curve if there are bad habits that need to be broken and relearned.

Experience is one thing that cannot be taught. All elements and components of a proven solid trading methodology can be taught, but experience must be gained by the individual trader. Traders who have time to experience markets and trading on a regular basis will absorb more experience than a trader who has limited time. Additional planning a trader could do is develop a time line to a goal and then plan the steps necessary to reach that goal.

A word of caution here: Each step in the trading education is important and has a purpose and a place. Do not overlook the challenges and rewards of taking each step. We have not yet come across any “fast road to profits” system in trading; success will require hard work, perseverance, and commitment on the trader’s part.


Software, Computer, and Office Costs

Traders must decide what charting program(s) to use that will best suit their needs. There are many available, and attending trade shows can be an excellent way to view them and evaluate their performance. This is another area of expense that any trader must incur and plan for. Along with a charting program, the trader must also evaluate computer equipment and make sure to use an appropriate computer system with the
software. This can also add to the initial costs associated with trading. Here is a list of items to evaluate and plan for as an expense of setting up a trading business:

• Computer equipment.
• Monitors; multiple monitors may be necessary.
• Software program/programs.
• Data providers for charting packages.
• Brokerage/commission costs.
• Internet access.
• Telephone equipment.
• Copy machine.
• Fax machine.
• Office supplies.

Traders new to trading should investigate what it will cost them to run their business on a monthly and annual basis. This will help them gauge realistically how much they must clear each month/year to make a living in the trading business.


Annual Business Plan

 

 

The end of each year is a time to prepare for the coming year with the trading plan and a business plan. The trading plan can be reviewed from the previous year and adjustments made for the coming year. The business plan will encompass the basic trading plan. Maybe there were some markets that were not successful, and traders
may  reevaluate  their  approaches  to  those  markets  by  looking  at  the internal data they collected throughout the year in their trading statistics. An evaluation of the specific trade management of specific patterns may reveal approaches that can be adjusted. It is a time to take stock and prepare for the next year’s trading. The trader can evaluate any changes to the basic approach and specific trade management issues. Here are some things to evaluate and plan for on an annual basis:

• Which markets will be traded in the coming year.
• A trading plan for each market.
• Time frames traded.
• A plan for incrementally adding on shares or contracts.
• Specific trading issues to study and improve or focus on (e.g., learning a new strategy, improving money management, trader psychology)
• An outline of how the trader will stay on track and focused throughout the year. This could encompass lifestyle changes or scheduled reviews of the trading plan to evaluate whether the trader is staying on track.
• A mission statement for the coming year.
• A review of trading expenses for the past year and a forecast for the coming year.
• Creation of goals and a plan on how to achieve those goals.

This process of trading does not have to be complicated or overwhelming and should be suited to the trader’s experience level. Involving yourself in this area of trading will sharpen the focus and create a well-thought-out road map of where and how to reach your goals as a trader. Traders are continually in a state of uncertainty when involved in and trading real-time markets. Even on occasions when the trader is very off the track and not trading according to plan, the trading plan is a tool to get back to developing good trading habits. Having a well-defined plan is a way for traders to have some grounding and, in a sense, some security, in that they can always refocus on the basics and move on from there.

                                                                                                                                  drycker  on Forex Article