If we regularly operate in the market we surely do it to win and the only way to make a profit in the long run is to treat trading as it is, a serious and real business that we should visualize like any other type of business. In this article we will explain precisely how to do this, which will provide us with a number of practical and psychological advantages. Likewise, we are going to analyze two primary mistakes that most traders make, especially beginners, and eventually lead to ruin.
Facts regarding trading
The idea of trading is attractive for many people: to become their own boss, set their own hours and work from home while enjoying a virtually unlimited income potential. In addition to these factors , anyone with a computer, Internet connection and a small trading account may have a chance. Nor should we deal with employees, customers and competitors (in the traditional sense), in addition to other benefits.
Because of these factors, people often fail to recognize or realize the financial, emotional and time commitments that are required to build a successful business based on trading. Here are some quick facts about trading:
About 90% of daytraders fail in the first year
There is no way to eliminate risk in trading
There is no trading system that earns 100% of the time
There will always be losing trades, even if you are a star trader with an excellent trading strategy
It takes money to make money – it will take a long time to earn a good sum of money with a small trading account
Successful independent traders can earn a decent amount of money, but most do not become Warren Buffet style millionaires.
Why should we see trading as a business?
An immediate psychological benefit of trading as a business is that it gives you a different vision and feel. Many traders see trading as their future and for some it becomes part of their identity. Although it is a business as we have already mentioned, we must visualize it as a separate activity in which we participate but that does not define us as people. Trading is a business that we own and is part of but does not constitute our total identity. The approach of trading as a business gives us a separation and detachment needed.
Also, building a long-term business means inherently organizing and systematizing all trading activity, with an eye on the future. This requires thinking about the inclusion of objectives and the necessary resources along with the activities by means of which these objectives will be fulfilled. In this way, our operations will be limited to a very limited degree if we have only the vision of trading as “a way to make money”. Of course we all want to make steady profits, but the reality is that we can not expect to consistently win a business that has never been properly organized. A business that is conscientiously planned and organized provides security and relieves pressure and stress.
Another significant potential benefit is that we avoid significant opportunity costs. Each month in which the trader operates and obtains few or no profits represents an opportunity cost because he has spent time while his investment capital has been tied up when he may have been employed to generate profits in other types of business. If a profit is not obtained in a month and in general no process was performed towards the profitability of our trading business, then the opportunity cost becomes personal at that point because the time lost unproductively in the trading could at least be Employee with family or other personal interests.