By Rob Colville on May 12, 2017 in
There are certain things that successful business owners do to make them just that – successful. Everyone can start their own business, but it takes a special kind of thinking to keep that business going, and even more to make it profitable. It’s that kind of thinking that needs to be utilised when you’re trading. Thinking of trading as a business and you won’t go too far wrong.
In business, if you make a profit you win and if you make a loss you lose. It’s really that simple. And if you are trading as a business, the same rule applies. Making money is good, losing money… not so good. It will happen though, just as it does in business, so be prepared for that.
Preparation is key. You wouldn’t one day decide to start your own business and expect to be successful just like that. And so neither should you expect to start trading without doing your research and end up being profitable with it. You might get lucky at the beginning, but that luck won’t and can’t last without the proper knowledge in hand (or in head) to back it all up. Think of trading as a business and you’ll already be halfway there, at least in terms of how seriously you should be taking it all. Trading may feel like a hobby, especially when you use the ‘set and forget’ method for trades, but anything that has to do with money is serious and really should be treated as such.
Just as with business, when it comes to trading you need to work out your costs. Can you afford to do it? Really? If that’s a yes you can move forward. If it’s a no don’t force it. Wait until you’re ready. You may not associate costs when you get started in Forex trading – after all, does it really cost you anything? Well the answer is yes, it does, and yes, you should be thinking of how much it’s going to cost you to really get going. Firstly, you’ll need some capital. When you start to think of trading as a business, you’ll see that this capital then has to fund pretty much everything. If you lose it all right at the beginning, your business will go bust. But if you can be careful and patient, you might just make that capital grow. And then you can start pushing forward.
Oh yes, there’s more! So although the losses will constitute the biggest costs of trading, if you are truly going to think of trading as a business (which we totally recommend) you will need to pay for other things as well. Other things that might well include a trading office. Sounds swish, doesn’t it? Sounds expensive. But it doesn’t have to be at all.
What you need is a good laptop, a desk, and a comfortable chair. If you want more than that, if you want extra screens and stand-up desks and all the gadgets and gizmos then that’s fine – if you can afford them. Otherwise don’t get too fancy too soon – your computer is the most important part of the trading set up, so if you want to spend a chunk of money, that’s where it needs to go.
If you are trading as a business you will know that there is no guarantee that, just because you’ve got a good set up and you’re ready to do this thing, you’ll make a profit. Them’s the breaks. That’s an integral part of understanding trading. Expect to win – big or small – every single time and you’ll come away disappointed. And broke. So, they key becomes determining how much risk to take with your money – with your profit. What, as they say, is the risk-reward ratio? You need to ensure that every trade you make is a worthwhile one, that you’re not doing it just because you want to make a trade, but that you’re doing it because you’re quite sure that, all things considered, it’s a good idea. Focusing on the risk-reward ratio has to be at the forefront of your work. Taking this in account could mean that you don’t trade that much, and that’s okay. In fact, that’s a good thing. Trading too much on the wrong kinds of trades is where you can get into all sorts of (financial) trouble.