Please be very well organized with a carefully constructed trading plan and risk metrics before you risk dollar one. Have a trading strategy that is backtested thoroughly with a positive expectancy. Be conservative regarding your entry and exit levels if you are backtesting a discretionary system. Be careful - I have seen newbies piss away astonishing amounts of capital trading 'small size' in the early formative stage of their careers (if they last that long). Join the capital preservation society - if you can keep from repeating mistakes, you will have a chance. Impulsive behaviour typically becomes self-destructive. This is the ultimate self-accountability game, and many really successful traders are lousy business people (for some insane reason, they all open high end restaurants that bleed them through 1,000 cuts).
I was a 'successful' ( as in netting millions) business owner before I came into trading. The edge is utilizing the profitable theories/experience u had in business and apply it to trading, it should be exchangeable. If u ran an unsuccessful business, or never ran a business anymore. U can not apply the theories or edges onto trading, so u will have to learn it from bottoms up in trading. 1. Business management requires solving many problems at the same time. 2. Business can turn $500 into $5milion , but trading can not. 3. Business needs 10 infusions of $500 to actually hit the one that makes u 5 million , 10 tries before 1 success. 4. Business can produce the capital u need to trade. 5. Xprofitableemployees * profit margin per year = how much your business nets a year. 1. Trading requires large capital 2. Each $50k in capital = 1 employee Under $5k = Can collector guy $10k = Mcdonalds employee $25k = Part time worker. $50k = 1 employee or yourself. 200k = 4 employees (Size of a subway sandwich store) 2M = 40 employees (Size of a large hardware store) 200M = 400 employee (Size of a large consulting firm) 3. Profit margin = What % net u make per year. 3% = bank cd . 10% = Retail supermarket 15% = Restauranat 30% = Software business 60% = unexploited new industries. ================ Now combine the 2, You want at least a 30% return , with 200 employees = 200 * $50k = $10 million profit margin = 30% return Each year net = 3 Million. ======================== Biggest Advantage for trading VS business. 1. business requires speciliazation of skills , u may be outdated in 3 years. 2. Trading , U can be in construction this year making 30% chips next year making 25% Tommy hilfiger apparelly year after making 30% Google year after making 50% 3. Many great businesses can not be entered or is monopolized or is govt controlled. Such as telecom, OIL , land based , Being a business owner u are shit out of luck. Being an Investor, u are in position to invest. Successful experience breeds more successful experience(s).
Thanks for your input. What type of person would succeed in trading but not traditional business or vice versa. Larry Williams mentioned that he knew of many successful futures traders who tried to take their winnings and turn them into millions more in the regular business world and it seldom worked. While off-topic from this forum, what types of businesses offer the ability to parlay small bootstrapped sum into a decent fortune. Thanks very much
There's no single answer and each failure will involve many variations (reasons) in comparison to another failure along with the fact that a "traditional business" can be many different types of businesses that falls into that category of "traditional business". However, here's a general reason to go with the general question... Failure to identify, understand and compete with the competition when traversing from successful trading to a new career as a business owner. Mark
wanted to add one category that's neither trader nor business owner and that's the position of CEO or similar don't know there's a guaranteed path to becoming a CEO but some of them are paid multi/hundreds of millions of dollars each year - plus their departure payments point being they don't have to set-up the company or provide the capital to do so
Of course trading is a business and should be treated like any other business. The object is to use your capital to make a profit. You buy a product cheap and attempt to sell it higher or in the case of a short sale you sell something you donât have with the idea that you can buy it back later at a cheaper price. Where you run into problems with this type of business is that a huge number of people have the same idea, and anyone with a few hundred dollars can get into the business. To succeed you require a proven edge and the discipline to exploit that edge. Both are hard to come by. Spend as much time planning your trading business as you would planning for any other type of venture.
Wow! Why would you want to go into business with profit margins that low? I just read the profit margin for the oil industry is 10%.