Negotiation is quite different from other companies, but it is still a business, and you must run it as one and think it’s a. Most of the traders initially on the right side of wrong way out of the door by treating their trade like a trip to the casino rather than a business that requires structure and planning and who has real costs associated with it.
If you want to succeed as a trader, the very first step, run your business like a business and as a consultation.
As with any other business, the way in which make you profit as a trader is bringing more income than your outgoing costs. In addition, like any other business, the way you lose money and eventually go out of business, if your expenses are greater than your turnover.
Your business on the market costs
- Losing trades
The main costs to operate a business of trading are losing jobs. Yes, it’s true, losing trades are and should be considered a cost of running a business. It is essential that you display in this way, because it helps you become less emotionally influenced by the loss of jobs. Think of it this way; a restaurant owner is not sad or angry when it needs to reorganize food or pay its employees because he knows these things is just the cost of doing business.
Thus, your biggest cost of business as a trader are losses you take the loss of jobs. Each merchant on Earth, no matter how profitable, lost jobs. You cannot avoid them, so just accept that you will have to deal with the cost of the loss of jobs and instead of trying to avoid them, learn how to deal with them properly, but you must accept it as a course first cost (more how do faced with this cost later).
Another smaller cost associated with trading is that of broker commissions or spreads. It is an ongoing cost for you and you should remember that whenever you enter a trade, you pay a spread or commission your broker. It is a real cost and you see it as such.
- Set up a commercial office
The most important cost following, you will have as a trader sets up your sales office. Now, this cost can vary considerably from trader to trader, but at the very least, you’ll need a good laptop and a desktop computer and a Chair. Some traders may opt for a multi-screen computer configuration and a costly computer desk and Chair, which of course could become very expensive. However, it is unnecessary to profitable business. All you really need is a good laptop and an internet connection.
- Good and bad news on trading costs
OK, now that we have discussed the primary costs of doing business as a merchant, we will first discuss the good news to their topic. The good news is that you know what your costs are and he is not much of them. In addition, you can contain your costs as a trader very easily and efficiently. This confinement is made by the management of your risks as you trade. This means, do not risk more that you can really afford to lose a whole trade, which is done by using stop loss, of course. Know how to properly place the stop loss will also be a factor important in managing risks and maximizing the reward. A correctly placed stop loss can make the difference between trade a loser and a winner in many cases.
Now for the bad news on trading costs. If you do not manage them and contain them correctly, they can grow to at the outset, very, very quickly. In fact, if you do not your risk properly you trade, you can end up losing all your money trading very, very fast, faster than in other businesses for sure.
Knowing this bad news on trading costs, it should make you re-read the previous paragraph again on the good news of negotiation of costs and remind you that these costs may actually be managed and contained, but it is up to you to do!
So, now, now you know the primary costs of execution of your trading activities, that there could be others, but these are the biggest for most traders. Your goal is to ensure that earn you enough money from your winning trades (revenue) to cover all your expenses and then some, while you make a profit.
How to improve the profitability of your trading activities
Now, it’s time to learn how to manage your business at a profit rather than a loss. There is obviously a bit which will be born a consistently profitable trader and I can’t cover everything in a short article, but I’ll give you a brief run down of the main things that you need to focus on. For more information, see my trading course.
As mentioned previously, a commercial enterprise runs to profit when income (money of winning trades) is compensating the costs (losses, program office installation, etc.).
The question then becomes, what can you do to make sure that your trading income far outweigh your transaction costs? Here’s an overview:
- Focus on the risk to reward ratio – on every transaction that you make, you must decide if the potential reward is enough to make valid trade. You must at least ensure a 2R or greater reward is possible while ensuring that you have your correctly placed stop loss.
- Don’t trade much – you need not to trade with high frequency to make money. It takes to focus on learning to handle properly, taking jobs quality / high-probability.
- Focus more on managing the money that another thing – money management, I mean managing and containing your risk per trade and also ensuring a 2R or a bigger reward is possible and also on trade stops. Most traders concentrating too much on inputs and waste of time of things like trade indicators, while in reality, they should be much more focused on managing money.
- Be sure to read correctly the price action – Finally, if you do not understand how to read a chart of price, you’re not going to go very far. The basis of every successful business is the dynamic understanding of prices and how to read and exchange of action pure price.
I want to do you next is to create a trading plan. A comprehensive but concise trading plan is required to operate a successful business. You can’t just “wing” and hope for the best. That’s what most of the traders and how most of the traders find themselves? Losing money and eventually drop out of school.