Tuesday, April 23, 2013

Trading as a business

The key to trading success is emotional discipline. Making money has nothing to do with intelligence. To be a successful trader, you have to be able to admit mistakes. People who are very bright don’t make very many mistakes. Besides trading, there is probably no other profession where you have to admit when you’re wrong. In trading, you can’t hide your failures. - Victor Sperandeo

Something I've been thinking about all day today - how trading is, and should be handled as a business. Because obviously it is. Anyone who wants to make a living off trading, needs to approach it like a business, and needs to be concerned with the following:

  • Business expenses
  • The main market or markets the business targets
  • Business model - how does the business intend to make money?

One wouldn't take business decisions casually. Everything would need to be planned. Lets say you are a cotton candy dealer, you'd try to get your supplies in order, have everything prepared, know how much demand might arise, etc. So planning, anticipation, and sticking to what you know becomes key.

Trading is similar. Follow the Hedgehog concept.

If you run a cotton candy store, would you try and sell wine? Poor analogy maybe, but as a trader, its important not to chase various markets. Its important to know and stick to markets we know well.

Last night, I put on a gold short. It was a good setup, however, it completely spiked and stopped me out. Fine, I had a stop, and I respected it. BUT, its not a market I trade, so why should I be in it??

A cotton candy dealer, stands outside a park or a school, waiting for the right time where customers arrive. How is trading any different? Its just waiting for your setups. Waiting. Patiently. The dealer waits for his "setups", so should I, the trader.

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