What does Forex trading mean to you? Is it a hobby, an interest? Maybe it’s a chance to make a better life for yourself or to be entrepreneurial.
When most traders begin, it is usually with the above thoughts in mind. Surprisingly, few start out with thoughts of building a business, but that is exactly what it is. It is an investment of time, energy and money. It is about strategizing, analyzing, growing and trading. Recognizing this reality is actually a necessary step in improving your profits, because of one main factor:
Focus.
The goals of business are somewhat impersonal. A business only has one goal, profit. All of the activities undertaken therefore need to be justified by that metric and are geared towards that end point. Conversely, a hobby or an interest is more personal and is determined by enjoyment or other aspects. People will pursue unprofitable or expensive hobbies, because it is enjoyment, not expense that is the determining metric. That’s not to say that it is not goal-oriented and satisfying, it’s just that the interests and outcomes can run contrary to financial success.
It can shift your focus away from profit.
Not only that, it can also subordinate your activities to other goals. At the very extreme, it is possible that a love of trading can supersede profit, and a trader might continue to trade unprofitably simply for the enjoyment of trading.
Such an outcome is possible when the focus shifts too far from profit.
The advantages of focusing on trading as a business goes beyond a simple mindset adjustment, it also has practical tangible benefits. A business approach involves planning and strategizing, recognition of risk and return on time allocated. This can help your trading in a number of practical ways.
A few examples
- A trader who treats trading as a business will have a clearly defined plan to control risk. A poor position will not be allowed to fester and a necessary loss will be taken for the protection of the balance sheet and underlying assets. This is often the best way to ensure profit.
- A business-focused trader will understand that ongoing analysis and development of a strategy is an investment in greater efficiency of profits, ultimately working towards creating a situation of a higher return on invested capital.
- A business-focused trader will push himself to develop the business, creating alternative revenue stream through acting as an introducing broker, affiliate, trading coach, white label partner, money manager, as well as adapting any other number of potentially available methods.
- They will invest time to develop the business, growing capital and allocating it to increase diversification, attracting better conditions and risk protection.
- They will control the work life balance better.
The reality is that most people trade as both a hobby and for profit. It is ultimately the personal passion for the hobby that makes Forex trading so engaging as a business. To be successful, every trader needs to find the balance between personal interest and business interest. Yet, joined together you have the planning and strategizing of a business and the dedication of a hobbyist, allowing you to reach heights and profits that would not otherwise be achievable.
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