Trading is not like business!

1---Conventional business provides either a service or a product that is of value to the consumer. The successful businessman creates value through his own actions. Conversely, there is nothing that a trader can do to create value in the end product. In fact, he is actually doing something that is unheard of in business. His actions are much like someone buying a product from a retailer, and then turning right back around and trying to sell that same product back to the wholesaler who originally sold it to the retailer he bought it from. Certainly, if the price of the product increases enough, this strategy would be viable for a normal business. But if you were to write a business plan on this premise, you would be mocked.

<b>This isn't true at all. Your example is flawed. You are assuming you buy from a retailer and then sell back to the wholesaler. Almost all business work this way from producer-wholesaler-wholesaler-retail. you cherry picked a scenario from retailer back to wholesaler when in reality, trading can be thought of as from wholesaler-retailer-wholesaler-retailer ( A very viable strategy in most industries).</b>

2---A normal start-up venture benefits from marketing of various types. Admittedly, they will suffer from varying marginal return on marketing expenditures, but if the product/service is the least bit desirable, they will absolutely increase revenue through advertising. This is in sharp contrast to trading. No amount of marketing can increase revenues for a struggling trader.

<b>You can market to increase assets under management which...as most REAL traders can tell you.. can make you profitable. Undercapitalization is the killer of most business (including trading)</b>

3---In normal entrepreneurship, the successful business owner creates an entity that operates within his current skill set. This skill set was developed prior to starting the new venture. Traders take the opposite approach. They begin trading and hope to develop the necessary skills before their lack of appropriate skill puts them out of business. Imagine the recent high school grad who decides that he'll immediately get into business consulting. Rather than go to school to learn business, he sticks an ad in the paper and says, "after enough companies have contracted my services, I'll figure out what works and what doesn't". This is obviously a recipe for failure.

<b>Again, this is not true at all. Think Dell computers, facebook, Goldman Sachs, etc.... Started by people who were interested in something and then learned as they went along. You picked a high school grad going into business consulting. An obviously stupid cherry picked example. A better example would be a high school grad that starts a lawn company. Knows how to cut grass but makes it up as he goes along (learns how to properly scope projects, marketing, adds another service line like landscaping, etc..)</b>

4---Related to #3 is the idea that a successful entrepreneur most often developed a skill set in the industry that plays to his natural talents. This is in sharp contrast to most prospective traders. The latter don't really have any idea what talents are required to be a successful trader, so again they find themselves in a backward process, hoping to first identify the necessary talents and then hoping that they currently possess the same.

<b>Again.. just wrong. Just look at any Entrepreneur type of magazine. Filled with real stories of people jumping into unrelated fields they have no idea about it and trying to make a living.(countless cupcake/bakery stories out now with people who barely baked before)</b>

5---As a continuation of the above, many skills are easy to come by without much natural ability. These can be learned through some light practice and study. The result is often a business that returns $30-100K annual income. The training for these usually comes from vocational schools. They will often operate from home, much like the trader, but in comparison, a $15K investment will likely be recouped during the first several months, and they can expect annual income near the national median during the first couple years. Trading does not fall into this category. The trader who develops a "vocational school equivalent" trading skill set, might expect returns of 10-20% annual. With $15K seed capital it will take around 20 years to reach the median income, and that is assuming that there are no withdrawals. The conclusion here is that the required skill set to produce the results necessary to make a living, are the industry equivalent of top tier surgeons. I would say that the number of people at this level is probably similar to the number of those surgeons too.

<b>how does this not make it a business? You just need more money to start in this business is all. Can't start a plane company with only $1MM. Doesn't make it a "fake business" because you arbitrarily picked 15K</b>

I guess what I'm getting at is the idea that becoming a successful trader is undoubtedly much harder than starting a successful business. To the extent that a little encouragement will not solve the problem of most struggling traders. The reality is that they are probably never going to become a trading success, regardless of how hard they work at it.

<b> And yes. 90% of small business fail within 3 years....I guess an italian restaurant or a toy shop aren't real business either!</b>

 

If trading is your only source of income or your primary source of income...your tax accountant, the IRS and your banker will disagree with anyone that believes trading is not a business.

Simply, you must treat your trading like a business...if not...it's just a hobby or investment like those that have another job to support their trading and they only get the maximum IRS 3k deduction (for those living in the U.S.).

Regardless, your message post is a REPEAT of other message posts in the past that believe (in error) it's only a business if a trader makes a product. That's like telling anyone in a different profession (e.g. fishery consultant) if you don't make a product, it's not a business.

Traders do provide a service...do you think there would be a CNBC, Bloomberg or any other financial market business if there was NOT traders on the exchange making a market for many different products in the world (e.g. sugar, oil, gold, wheat and so on).

Could those markets collapse or would they find a fair value for their products if there was no exchange?

Just think about all those people employeed by CNBC, Bloomberg, Wall Street Journal, Trading Magazines, Exchange Employees, Contractors if there were no traders...no market. That's a lot of lost jobs if you manage to get people to believe trading is not a business and they act as such.

Mark

 

Depends on who is doing the teaching.

 

If you are a capable teacher, why are the traders failing?

In any venture you are more likely to fail if:
You don’t know what you are doing.
You don’t have a well thought out business plan
You are undercapitalized
You don’t have the discipline to follow your plan.

 

You're missing some very relevant points. First, the small business failure rate within 5 years is anywhere from 65% to 80%, depending on the study or research you look at. A well capitalized disciplined trader can certainly achieve rates as good as above.

In addition, as I stated earlier, trading is NOT impacted by the economy. I know a couple successful business owners with 20 year track records that are really struggling the past couple years. One moved to get a lower lease and hopes to stay afloat. With trading I don't care if we're in a boom or bust cycle; there's money to be made every day -- both long and short.

And spending a ton of hours with someone wanting to open a restaurant for example will not make them successful. Ultimately, the competition, the economy, the staff, the chef, the menu, the perception of customers will come into play. How well a person is prepared is merely one variable in running a business just as it is in trading.

 

a trader is not much different from surfer at the beach or poker player in a poker championship table in the big scheme of things

or ticket scalpers at sports game.

what do you think the scalper term came from.

there isn't much different between a trader and investor...all of us want to make money from the market.

 

The premise of this thread is heavily flawed but a few members have already cut it up nicely.

I will say this:

Go to Las Vegas, or AC, or Macau... take a good hard look around you at the type of people and personalities you are surrounded by. Especially the frequent flyers and people who eat those places up like they are some sort of Shangri-La.

Now take a good hard look around ET, and the industry in general. Do you see the degenerates, the fast money types, the wannabes, the flashy people who are in foreclosure/bankruptcy, the false prophets, the industry people trying to cash in on your carcass, the bright lights, the big city?

The casinos, and the professional gamblers, are running businesses. The other 95% of you are going to get taken and you may certainly feel like these aren't business people, they aren't running "real" businesses. Where you are in the food chain is going to have a direct effect on how you feel about our industry.

It is a business though for a few of us.

Our products are risk and liquidity.

What next, are you going to start telling me the software business isn't a business?

 

Whoa, whoa, whoa.....You trying to say that all these "gurus", booksellers, and website promoters who register here aren't for real??

And, there are people in this business who would be willing to sell people something that is of little or no value???

I'm shocked!:eek:

 

Yet there are still tons of people getting taken every day. We should all just be objective and say "Listen, your odds of long term success are probably < 5% if you are retail or not professionally groomed/mentored".

That is a grown up approach versus the two extremes of "Get rich for only 5 mins a day of following my book" and "You have not a snowballs chance in hell, it is all rigged, just go bet on black at the tables, and go back to your wage-slave caste now!".

Frankly I don't think telling people that 95% fail will stop a single damn person. There are people going to casinos thinking they have an edge on the house when they are outright told by everyone (including the casinos!) that the odds are stacked (and even what the odds are!) on most of the games

This of course is excluding games where the house takes a rake, which is the house admitting you can make money through non-"nefarious" means.

 

Toughest business out there is to be a farmer. Invest all that money into the land you paid retail for to produce a product that you will sell at wholesale by being the low man in the production chain. Buy a new John Deere "Green Monster" air conditioned, internet satalite to tell you where to spread the high dollar fertilizer with that "GREEN MONSTER" that you paid retail for a few hundred grand.

Crop prices down at planting time? Tough shit, you plant anyway because that is what you do, that land needs to be worked regardless of prices. Farmers are true gamblers, they plant and gamble on the weather, they gamble on getting a good price for their crop, they do not gamble in the futures mkt or else they run the risk of losing their land.

Farmers buy at retail and sell at wholesale. Thats a tough nut to crack.

The good news is they love what they do.

We as speculators are just a link in the food price chain, we have a valuable job to do, for many speculators unfortunately that job is to feed the winners with a steady cash flow to keep the game going.

I really do not mumble about NoDoji running up the price of gasoline when i fill up because she is a winning futures speculator (a blond one at that) i just think how high the price would be if it was not for all of the losers plowing their cash into the mkts for the speculators to help keep the prices down.

HOG out!!