Trading as a Business

[trendie]

How do people treat trading as a business ?

I find I lose my discipline because I keep thinking of the money. When I lose, I quantify it in pounds and pence.

I have tried thinking of trading as a computer game, where I am winning points, but when the stakes reach a certain level, I start choking on the decisions, and lose discipline.

I am now thinking of treating my trading as if I were a salesman.

Each trade I see as a potential sale. The money risked is the equivalent of "petrol money" to go and see the client. ( If my risk is £100, I treat it as if my client is far away, and I have to spend £100 worth of petrol to see him. )

I write of this amount in my "expenses" column.
When, or if, the trade goes in my favour, I treat it as a deal struck. That I have "sold" my product to him. This goes into my "sales" column.

This has helped me to accept the fact that to run a business there are running costs.

My main problem with this test-project ( paper-trading ), is that since I see it as a product to sell, I am having to accept price-targets.

I am still trying to find a way of conceptualising the business such that I allow the trade to run.

Do other traders find it easier to trade by facing the truth of trading, that you are making/losing money?

Or do you find it easier to think of trading as something other than money ?

 

[c6ackp]

Hi trendie

I'm fairly new to trading (1 yr), but I've always focussed on the game itself, which is simply to accumulate points. I'm hoping that this will ensure that my judgement will not be affected in the future with larger/more lots.

If you are jumping out too soon then the problem may not be your attitude. Perhaps you should review your exit signals instead. If you have complete confidence in your exit strategies then you will find it easier to stick to them - the jumping-out problem will then disappear (much easier said than done, I know ).

I use stops between 5-20pips (intraday forex) and I see those pips as "bait" to draw out the win. I accept that 5-20pips is the "cost" of testing whether my judgement in taking that trade is correct.

I guess it's like a door to door salesman. The successful salesman isn't affected by another door being slammed in his/her face as this means that, statistically, he/she is closer to the next sale. The unsuccessful saleman will take it personally and give up.

Just my 5pips worth

Best of Luck
c6

 

[dbphoenix]

How do people treat trading as a business ?

I find I lose my discipline because I keep thinking of the money. When I lose, I quantify it in pounds and pence.

If losing causes your discipline to crack or shatter, then you likely haven't fully accepted the fact that failure and loss are a part of trading.

If you believe that you have accepted the fact of failure and loss and your losses are beyond the limits of acceptability, then you likely haven't sufficiently tested whatever strategy you're employing.

That's pretty much it.

 

[Glenn]

The Widget Factory

How do people treat trading as a business ?

I find I lose my discipline because I keep thinking of the money. When I lose, I quantify it in pounds and pence.

I have tried thinking of trading as a computer game, where I am winning points, but when the stakes reach a certain level, I start choking on the decisions, and lose discipline.

I am now thinking of treating my trading as if I were a salesman.

Each trade I see as a potential sale. The money risked is the equivalent of "petrol money" to go and see the client. ( If my risk is £100, I treat it as if my client is far away, and I have to spend £100 worth of petrol to see him. )

I write of this amount in my "expenses" column.
When, or if, the trade goes in my favour, I treat it as a deal struck. That I have "sold" my product to him. This goes into my "sales" column.

This has helped me to accept the fact that to run a business there are running costs.

My main problem with this test-project ( paper-trading ), is that since I see it as a product to sell, I am having to accept price-targets.

I am still trying to find a way of conceptualising the business such that I allow the trade to run.

Do other traders find it easier to trade by facing the truth of trading, that you are making/losing money?

Or do you find it easier to think of trading as something other than money ?

You work in a factory. You make widgets on a machine which very dangerous to use. If you are not careful with it, it will grab your tie or cuffs (or other items of a more personal nature) and pull you in and chew you up.

When you make good widgets then you are doing ok. When you make bad widgets, you must stop the machine and prevent it making any more.
Your whole focus is on making good widgets and avoiding making too many bad ones.
You really enjoy the challenge of operating this dangerous machine and doing your best to get good widgets out of it. You don't really care whther you get paid or not, so long as you can achieve the objective of being a good widget maker. And you want to be a top-gun widget maker.
But when you are there doing it, you must concentrate totally on what you are doing. Otherwise you will get chewed in the machine while it pumps out bad widgets by the score and eventually you lose your job because you can't make good widgets.
So the first rule in the widget factory is to stop yourself getting chewed up by the machine.
You will not make any progress until you can do this.
Once you can do that then you can concentrate on producing good widgets and only a few bad ones.
The other people who have been in the factory a while have all had to go through this period. There was no proper training for them or you even though there are lots of books about "How to make a million widgets easily" produced by unscrupulous failed widget makers.
The others in the factory got to stay there by concentrating on the widgets and nothing else.

You have to enjoy making widgets and concentrate exclusively on that. It is only when you can make them consistently that you will really get paid. But the real reward is knowing that you are good at making good widgets, because so few people can do it. The pay will come automatically and you don't need to think about it.

Glenn

 

[GotGold]

Great post Glenn!

 

[dbphoenix]

You really enjoy the challenge of operating this dangerous machine and doing your best to get good widgets out of it. You don't really care whther you get paid or not, so long as you can achieve the objective of being a good widget maker.

Unfortunately, few beginners understand why they're trading in the first place, and this leads to all sort of difficulties. Are they doing it because they love trading? Are they doing it because they want to be good traders? Or are they doing it to make money? If the last, then why aren't they making money? Could they be trading for some other reason?

 

[timsk]

Hi Trendie,
I suspect strongly that you know a great deal more about trading than I do! :cheesy: Having said that, the replies from dbphoenix, mr.marcus and Glenn especially - hit the nail squarely on the head head, IMO.
Glenn said: "You have to enjoy making widgets and concentrate exclusively on that. It is only when you can make them consistently that you will really get paid. But the real reward is knowing that you are good at making good widgets, because so few people can do it. The pay will come automatically and you don't need to think about it".
I trade U.S. sharers. To my way of thinking, Glenn's comments sum up to perfection the way Mr. Charts, Naz and others trade. Unfortunately, I am not consistantly profitable, so my views don't count for much - they merely represent my hopes and beliefs!
Cheers,
Tim.

 

[trendie]

Hi timsk,

I have got my head around the psychology of trading - EOD for sure.
I am profitable using EOD Fibs ( Sandy Jadeja ), and my own MAs.
I think the reason I am OK EOD os because I only analyse when the market closes.
( I am not trading in sufficient size to give up the day job, but am gettting there, slowly )

I have been day-trading for two-weeks, and I have to say, it seems to me to be a whole different ball-game.
I am having to re-learn the mind-set.

My question really was aimed to get people to describe how they view themselves as traders. Whether it is clearly as money winning/losing, or by viewing themselves in a different way, to reduce the pressure on themselves.

Glenn has so far provided the best analysis. I think that attitude is true for successful businesses as a whole.
thanks for all replies.

 

[chump]

I certainly take the point Glenn was making above re concentrating on the satisfaction element of trading but I don't know that this is fully necessary to answer the question posed. To me it is more basic than that and DBP came closer to the crux of it..... engage brain at all times .... what am I doing this for today ... what is my goal ... now if your goal is satisfaction fine ... but I suspect the specific goal is academic ... the core issue imo is to always know what exactly is your goal and it is your "business" to know the answer to that question everyday.

 

[timsk]

Hi Trendie,
You said: "I have got my head around the psychology of trading - EOD for sure.
I am profitable using EOD Fibs ( Sandy Jadeja ), and my own MAs".
It sounds to me as if you are very much on the home run. Hat off to you, sir! If EOD trading is working for you, concentrate on that, at least for the time being. If I, and the other 20,000+ members of T2W take your claim to profitability at face value (i.e. no reason to question it) - is it, by implication, a recommendation for Sandy Jadeja's Fib course?
Tim.

 

[nicos]

Business is about knowing what business you are in! Being focused.. specialising, knowing your produsct inside out. Knowing your turnover targets (timeframe) and sticking to it. Knowing what it's worth at all times.

Monitoring your market and jumping at buying/selling opportunities.. and getting rid of it before you need to throw it away. Being ahead of the competition and selling at your target, when you know the time and price is right (trading with the smart money rather than aiming for home runs)

It's about management. Risk management, money management, self management (stress management?)

It's about keeping detailed records and refering to them often.

There is only so much you can do when you are in business, but you do it because you chose to do it. Well run businesses make money. The main thing is the fact that you must be prepared to take a risk. Otherwise, if you are not cut out for it, get a job.

 

[trendie]

If I, and the other 20,000+ members of T2W take your claim to profitability at face value (i.e. no reason to question it) - is it, by implication, a recommendation for Sandy Jadeja's Fib course?
Tim.

timsk,

I had a lot of problems using Fibs, and I said so to Sandy !!
But, he has been kind enough to personally reply to all my questions, and in so doing, gave me confidence to continue trying with Fibs. Also, by replying to me, he has, in my opinion, shown himself to be committed to his system, and to help others.
( I originally had difficulty calculating risk-to-reward, and was closing out trades on first signs of reversal. I now understand the ideas more thoroughly ).

The secret, is that I stuck at it, until I mastered the idea, rather than ditch it mumbling I had been duped. This means accepting losses ( which were caused by my lack of understanding rather than any weakness of the system. )

But, being the cautious and curiosity-driven person that I am, I still using MAs as a parallel test.
I LOVE testing new ideas. Thats why I want to master day-trading as well.

So, yes, you may take it as a recomendation of Sandys course.

 

[PAINTACE]

"The secret, is that I stuck at it, until I mastered the idea, rather than ditch it mumbling I had been duped. This means accepting losses ( which were caused by my lack of understanding rather than any weakness of the system. )"

There are a lot of t2w members who should read that statement every night before going to bed.

 

[Racer]

I do not look at how much money I make or lose on a trade.. e.g. I had a short on and it looked like it was going up.. so I closed it out because the trade looked 'wrong' . I have a rough idea of what I make but don't add it up to say I made such and such this week or try to hit targets. I consider getting out of the bad trades early enough is the best way to make money.
I am not bothered if I make thousands in a day, if it does become exciting I walk away because I am getting emotional about it and cannot assess whether I should get out at that point or let the profit run. The same with if it is going wrong.. you need to be completely cold and unemotional when you are trading or you can't see the signs that the trade is going wrong. Fear and greed act instead.
It is when money becomes unimportant that you will make more of it!

 

[wisestguy]

DBphoenix is correct , you must understand the reasons why you are trading in the first place becasue o/w in the long run if it is for the wrong reasons , you won't last .

IN your case , I feel that you are thinking about the $ too much , you love $ too much . it seems a weird thing to say , but really the computer game approach is the only one . BUT that does not mean you trade like a loose sack ! you still want to win but not $ , you want points !

obviously when the points plie up so does the $ .

To do this well , what you need is good old fashioned sensible risk control , I get the feeling that your RC is a lttle slack , that can only coumpiund your worst feelings about trading.

one other thing , banking $ , that is taking winnings from your SB account and banking it = very important both $ wise and pschologically . believe me , you are better off and feel 10x better when you have banked your 130 point win rather than left the money to " compound " as some say only to see it fritter away.

it can happen even with the best RC , on one can win 130 points everytime all the time , anyone who says so is a damn liar.

so hope this helps.

 

[timsk]

Trendie,
Cheers. For the record, I second PAINTFACE's comments.
Tim.

 

[LION63]

Different traders with divergent opinions....that is what makes the markets what they are. My view is the exact opposite of those echoed beforehand. I am in it for the money and the money only. It is the profits that bring satisfaction, joy and the feeling of success. Why else would I spend many hours a week researching and sitting in front of a screen when there are more enjoyable things to do? It is not a hobby and neither is it a game. However, I can understand and accept when people say otherwise.

The reason many traders tend to find it difficult to deal with the losses (or profits) is that they trade above what they sub consciously believe to be the 'COMFORT ZONE' (been there and done it). It then follows that either panic, anxiety or stress set in and this in turn leads to frustration or disillusion. Of equal importance is having a winning strategy(ies) in place which stand up under scrutiny. When these factors are in place, the rewards follow.