Trade Like A Business

Two Steps to help increase your trading productivity

forex trading like a business

The odds of becoming a successful trader are very slim.  As the great (and late) Mark Douglas once wrote “if I were to classify traders based on the kind of results they achieve, I would put them into three broad categories, the smallest group, probably fewer than 10 percent of the active traders are the consistent winners...The next group which consists of between 30 and 40 percent of active traders, are consistent losers... The largest group, the remaining 40 to 50 percent of the active traders, are the boom and busters. They have learned how to make money, but they haven’t learned there’s a whole body of trading skills that have to be mastered in order to keep the money they make.” The term “trading skill” is often thought of as just referring to the price chart, however, in working with many aspiring traders over the years, I’ve noticed that the greatest “lack of skill” isn’t always on the chart, rather in the approach. 

What Is a Professional Trader?

Many believe that in order to be a considered a professional, they must trade full-time and have it be their only source of income. Bloomberg Television must be on in the background, a Wall Street Journal has to be read each morning, and the day must consist of nothing but actively watching a price chart tick up and down. Although many do this, including myself when I first began trading the markets, a “professional trader” is more of a mindset than anything else.  It means deciding to treat your trading like a business instead of like a hobby and taking the appropriate actions to put yourself on the best path to success. 

Most successful businesses start by creating a business plan which is a formal statement defining what the business is from a philosophical standpoint.  This plan also outlines the businesses goals, objectives and tactics which essentially answer the two main questions that every business has. “What do we want to achieve and how are we going to go about achieving it?” In trading, the “what” is usually pretty simple. We want to produce profit. The “how” however, is a question that often goes unanswered and in many cases unasked. I hate to over simplify and make finding success in trading seem easier than it really is, because it’s not by any means, but to be a successful trader all you need is the following: 1) A strategy which provides you with an edge in the markets and 2) the ability to consistently execute that strategy.