Taking Trading Seriously

The people who are most successful in trading have a number of things in common. One of the most important of these traits is that they treat trading as a business, not a hobby.

I know a lot of people think the word business means boring sales meetings, endless conference calls, and regret fuelled office parties, but it doesn’t have to mean just that. When I talk about trading being a business, I mean that it is a professional occupation that should be treated as such.

For any business to succeed, it needs certain elements to be in place:

* A clear objective
* A plan of how to achieve that objective
* Competent staff who can carry out that plan

And in any business, there are some important functions that must be carried out in order to ensure its smooth running, and indeed ultimately its survival:

* Record keeping and reporting
* Accounting
* Budgeting
* Disaster planning
* Training

All of the above can be, and should be, applied to trading. Of course, for the average trader, the “competent staff” will be the trader themselves. They will likely also be the record keeper, accountant, and maybe the qualified first-aider too! But just because a trader is a one-man band, doesn’t absolve them from their duties as a business person.

So why do so many people ignore all this? Why do they think they can just open a chart and start trading? My best guess is that it’s because it’s so easy to “just start trading”. The barriers to entry are so low as to be virtually non-existent.

Think about it. If you decide you want to be a trader, what do you need? Some charts and data. That’s easy, there are free charting programs around, and data is cheap at a few dollars a month. Then you need a broker account. The recent crop of web based brokers let you get up and running in no time at all, and with a minimal deposit. Back in the day, you had to sign all sorts of bits of paper and mail them off along with proof of identity, solvency, etc. But that’s all changed, now electronic signatures make the task a breeze. At worst, an emailed scanned signature is enough to get going.

And that’s about it. With minimal time and money, literally anyone can become a “trader” overnight, or quicker. Compare that to starting almost any other kind of business, and it’s plain to see that trading is almost too easy.

This ease comes at a price. With so little distance between having the idea “I want to try trading” and making the first trade, there is little time to consider the training that might be required to make a success of the endeavour. Again, think about what might happen when starting virtually any other career, such as nurse, teacher, submarine captain, or architect. These are not professions you can start practicing overnight. The barriers to entry are high, and they force you to consider the training required.

Trading is not unique in being easy to start. The internet is opening up all sorts of areas of work that were previously the preserve of the well educated and well trained. Journalism and photography are but two examples. Now anyone with a keyboard and a camera can create work and get it online for the world to see. The difference though, is that an amateur photographer or blogger has little to lose aside, perhaps, from a small helping of self-esteem. The trader on the other hand, puts real money at risk the moment they open their first trade.

Low barriers to entry, and relatively high risk mean that many try, and many fail. Which is a real shame, because just a little research and training can make trading a viable option for almost anybody who is willing to put in the effort.