Across the board you can see where partnerships in every type of business, from financing to retail, have been highly successful. The same can be true for Forex trading. Find the right partner to work with, and you could build your own empire with them. The reasons for success are simple; combining complementary skill sets and doubling your investment capital makes you and your partner twice as strong in the Forex market.
All good pairings need to be nurtured in order to survive. To avoid any conflicts with your partner and continue to maximize on your potential, follow these tips:
Guest post by Casey Stubbs of of WinnersEdgeTrading.com
- Have a signed agreement in place. Despite how long you may know your partner, it is always a good idea to have every detail and obligation of both parties mapped out and agreed upon. This will serve as a good basis for possible future disagreements.
- Consider a limited partnership. In a couple of successful Forex trader pairings that I know, the more experienced trader will take on the brunt of the responsibility. This eliminates the assumption of liability that the lesser person holds for the senior’s actions. If this is viable for you and your partner, have an experienced attorney draw up the necessary documents.
- With that limited partnership comes a split in responsibility. Even if it is 51 to 49, one partner is essentially the point person for accountability. Again, I have only seen this work where one of the partners has considerable more experience trading over the other. In essence, the lesser partner is giving up a small portion of control in return for profiting off of his partner’s years of know-how in the market.
- Share everything, including all business expenses. The individual responsibilities should have been laid out at the beginning of your relationship with your partner, but when it comes to the financial side of the partnership the expenses should be divvied up in the same form that the profits are. In a 51-49 partnership, this means that the lead partner is paying 51% of the expenses. The moment one partner begins to take on more than his fair share of the expenses and responsibilities is the moment when the business arrangement begins to decline.
- Have a clearly defined exit strategy. Even many marriages start off with a pre-nuptial agreement in place in case things don’t work out. You and your partner should have the same. As part of your contractual agreement there should be provisions made that outline how it will be handled if one of you decides to walk away.
Take into consideration such things as dividing the money in the account and expenses that have not yet been paid for. There should also be a provision for notice. For example, if you were to decide to branch out entirely on your own you would have to give your partner X amount of weeks’ notice before doing so. This allows for all loose ends to be tied up before the partnership is severed.
- Expect that your friendship is going to end when the partnership does. Even under the most amicable of circumstances I have never seen a Forex trading duo remain friends after the resolution of the partnership. This is the main reason why I will not partner up with a close friend. The partner choices I have made in the past have all been based on respect for abilities, rather than shared common interests.
Learning to Relinquish Some Control
Not all traders are able to handle having shared control over their Forex trading funds but it is highly beneficial, especially for those who are new to the market. Partnering up with someone who is more experienced than you are allows you to not only learn from them, it also gives you more room to develop a profitable trading strategy of your own. As your account is increasing in size you are able to see first-hand what works and what doesn’t, while eliminating a portion of your personal risk.
If you do recognize that you are of the personalities who cannot relinquish any control, then a 50/50 partnership may be your only other option. Find another trader of the same skill level as you who complements your trading abilities. You must each have different strengths in order for this to work. Understand from the start that this will be a short-term agreement that is only in place to help you both augment your initial funding. Have a clear goal agreed upon for when the partnership will end, whether it be a time-line of 6 or 12 months or a financial goal that needs to be reached.
While this type of partner agreement is not ideal, it will increase your initial start-up capital, allowing you to increase the number of trades you and your partner participate in. This increases your odds at showing a profit right from the beginning.
Taking that initial plunge into the Forex market is a brave move for anyone. Having someone to work closely with that has the same goals as you do not only helps ease any fears, it allows you to learn quickly how to be successful. Just remember to find a partner that is going to help you hone your skills so that you will have continued success once the partnership has ended.
Casey Stubbs is the founder of WinnersEdgeTrading.com which is one of the most widely read forex sites on the web. Winners Edge Trading has trained thousands of people to trade the Forex markets.
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