The Business of Trading

It fascinates me how the general population perceive financial markets. Some see them as prestigious as they believe the financial markets can only be understood by the highly intelligent ones. Others perceive them as scary as it is glorified gambling where money disappears. Then, there are the ones who are intrigued by them and wish they could make millions from the markets like they were on Wall Street. Funnily enough, the financial markets are just like any other market in this world. A market where you buy and sell product in order to make a profit – whatever that product may be. Therefore, your trading account is simply your business in another market. Run your trading account as you would a successful business. Here are 5 key components:

Every business will have its competitors. The customer will decide whether to choose business A, B C, or D. Let’s say they go with business A. Therefore, business A has taken a profit which would have otherwise belonged to the other businesses B, C or D. Some people don’t like the fact that a winning/profitable trade creates a loss for another trader and will therefore be happy taking a smaller profit. However, they need to be trying to get those profits as large as possible. Just like in business, you are trading to make a profit. You can support your competitors/co-traders and work together from time to time like other industries do but at the end of the day you are there to grow your business. Make your profits as large as you possibly can.

React to your current situation. You should always be proactive so that you can be ahead of the game and know your options when situations present themselves. However, there is no denying you also need to be reactive. You need to react to feedback. In business, feedback can be in the form of customer reviews, system errors or loss of time and money. The latter two are also true for trading. React accordingly and play defensively. You need to consistently block the losses and let the profits run. React to what is in front of you.

It is all about management. Despite what many people think, trading is not about being right all the time. It is all about financial management. Any successful business owner would know from experience that financial management is key for survival in the business world. Your losses in trading are your costs in business that you need to minimise and ensure their value. The value lies in the methods and criteria used to select your entry point in the market. Manage your finances as you would in any other business and know what it costs to “open the doors”. After all, you need to afford to trade another day.

What can be measured, can be managed. If it is all about management, then it is also all about measurement. Analysis in trading and business is essential. You should know your business inside out from every angle. With anything in life, the better you understand a situation, the easier it is to direct the outcome. If your business is failing to meet distribution targets, you can find a solution once you assess the supply chain. You need to know everything you can about the situation first, before you manage it and provide a solution. If your trading isn’t providing the results you would like, analyse your system to identify where you are getting results and manage accordingly. Measure the process and the results to then analyse.

Self-sabotage. In business, trading and life itself humans are known to self-sabotage. This can be for many reasons. Sometimes it is a familiarity of failure. Many people don’t like change and if they succeed it will generate some changes in their life. This then presents a fear of the unknown and, in some cases, a subconscious need to be in control. Some people feel unworthy of success or have bad habits that are detrimental to their success. Another contributor is a need for excitement – positive or negative. Both, business and trading are not the thrill that can often be inferred. Work on your mindset by choosing your thoughts, discovering your fears and altering your perspective. Learn how to become comfortable with change and build the courage required to succeed. Understand how your mind works. 

When you’re ready to learn more about business psychology, strategy and/or financial management email jaya@jayalesley.com

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