27 Sep Treating trading like a business

Treating trading like a business

Any busi­ness needs to have a struc­ture and should be treat­ed like, well… a busi­ness. For some time now I have been think­ing about this. I’m not say­ing I’m already clear on the mat­ter but have some ideas on it. I have been learn­ing ‘how to trade’ for a while now and been think­ing to set myself up as any oth­er busi­ness. This post is going to be just that. How to look at my trad­ing as a busi­ness. In order to do that we need to deter­mine the dif­fer­ent parts with­in this busi­ness. Keep in mind that I will incor­po­rate run­ning this blog into this as well. My goal is not (yet) nec­es­sar­i­ly to mon­e­tize this blog, but to focus on earn­ing through trad­ing. Before we start…

DISCLAIMER

Click here for my dis­claimer. It basi­cal­ly says that I am on my path to becom­ing a trad­er and these are just my opin­ions on how to approach learn­ing to trade. Feel free to check it out and com­ment on it. 

Here it goes…

I read up on sev­er­al online resources on how to treat trad­ing like a busi­ness. Here I will dis­cuss the fac­tors I have gath­ered from them. This arti­cle will serve as a blue­print of sorts to lay­ing the foun­da­tion of this busi­ness. Let’s make no mis­take about it. This is a business. 

Found­ing member

I am the found­ing mem­ber of this new com­pa­ny. That sounds good. What prob­a­bly doesn’t sound good to most is that I am also the in charge of pur­chas­ing, sales, HR, and so on. When you start out with most busi­ness­es you usu­al­ly don’t have the lux­u­ry to hire peo­ple to work for you. You need to put on that hat that is required at a giv­en moment and just deal with it. This is how you get start­ed. Be the man of all trades.

Busi­ness plan (a.k.a. trad­ing plan)

The found­ing mem­ber is in charge to give an ini­tial direc­tion to the start-up. In order to do this you will need to make a trad­ing plan based on all that you have learned. Both from study­ing trad­ing and real-life expe­ri­ence. This trad­ing plan should include things like:

• What kind of trad­er are you?
• What mar­ket will you trade?
• What time frames to use for your Tech­ni­cal Analy­sis (TA)?
• What will be your pri­ma­ry time frame for entries and exits?
• What times will you trade?
• Will there be dif­fer­ent strate­gies to trade dif­fer­ent times because of things like news reports and/or high­er volatility?
• Define the indi­ca­tors you will use as part of your TA. Indi­ca­tors for trend, momen­tum, volatil­i­ty and volume.
• Define your entry rules.
• Define your trade fil­ters. Things like between what times do you want to trade in com­bi­na­tion with a cer­tain devel­op­ment in the mar­ket (ie. 20SMA cross­ing over the 50SMA) as an entry signal.
• What order types to use?
• What posi­tion size?
• And very impor­tant­ly. What Exit rules will you have?

This plan will give your ’employ­ees’ the tasks to work on. To devel­op fur­ther and hope­ful­ly improve upon. Now that you’ve got the foun­da­tion for start­ing your com­pa­ny. Let’s get some work­ers shall we.

Hire some peeps

Before we can hire peo­ple (ie. you wear­ing a dif­fer­ent hat) we need to estab­lish what ‘depart­ments’ there are in this new com­pa­ny of yours. Since we are just start­ing off I will com­bine some depart­ments for now and per­haps sep­a­rate or expand them in the future. So I’d say that there are the fol­low­ing departments: 

• The Research and Devel­op­ment team
  • This is the team that goes out and learns what is need­ed to learn to get bet­ter at trading.
• The sales department
  • This is very the gravy is made. These are the guys that go out and bring in the moolah, the big bucks, the kach­ing kaching. 
• The Human Resources department
  • This is the depart­ment that makes sure you don’t have a burn out. Keeps you focused on ready to go. 
• The Man­age­ment team
  • These guys keep a tight ship to man­age expec­ta­tions of each depart­ment and adjust when needed. 

Schizofrenic?

Obvi­ous­ly, I don’t mean to set out to cul­ti­vate dif­fer­ent per­son­al­i­ties although that might have some appeal. I thought that by doing it this way I could fur­ther clar­i­fy the intri­ca­cies of the tasks that each depart­ment has. To me, all depart­ments are impor­tant. The one with­out the order is prob­a­bly a bad com­pa­ny des­tined to go under. So let’s have a clos­er look at these depart­ments and see what they do.

Research and Development

This depart­ment is in charge of gath­er­ing the knowl­edge first. Then test­ing it. Then per­fect­ing it. Obvi­ous­ly a very cru­cial part to trad­ing. One could say that this is the foun­da­tion of the com­pa­ny and it wouldn’t be untrue. Let’s have a look at some of the things this depart­ment is in charge of:

• Learn­ing about dif­fer­ent indi­ca­tors in Tech­ni­cal Analysis
• Doing the same for the fundamentals
• Deter­min­ing cap­i­tal requirements
• Deter­min­ing costs
• Deter­min­ing risk management
• Deter­min­ing the trad­ing plan

Sales, baby!

This is the team that actu­al­ly goes out into the field and makes trades to earn some prof­its.  They are in charge of using the tech­niques and trad­ing plan giv­en to them by the R&D team to imple­ment in their trad­ing. To per­fect these in the field based on real-life expe­ri­ences. These expe­ri­ences then can be used by the R&D team to be fur­ther developed.

Human Resource the sh*t out of your team

Why do you think Google spends so much on the well-being of its employ­ees? Hap­py work­ers, hap­py cus­tomers. You should also have some­one in charge of your well-being. Mak­ing sure you take a break. Exer­cise. Social­ize with peo­ple. Don’t for­get you’ll be spend­ing a lot of time in front of mon­i­tors look­ing at squig­gly lines. You need human inter­ac­tion at some point. HR will also make sure you have the right nutri­ents. Plen­ty of water to stay hydrat­ed. Plen­ty of cof­fee to stay sharp. And whiskey after trad­ing hours to calm down. What?! It’s my com­pa­ny. I’ll do what­ev­er I want.

The MT

These guys make sure dai­ly, week­ly, month­ly quo­tas are being met. To make sure every­thing is in line with the grand vision of the found­ing mem­ber.  They will per­form peri­od­ic reviews of each depart­ment. These guys will col­lect the rel­e­vant data and draw con­clu­sions and del­e­gate to each team for fur­ther analy­sis or legwork. 

What about the accountant??

I know I know. But before we get to that… Let’s first start mak­ing some mon­ey. Wor­ry about all the rules and reg­u­la­tions lat­er. Oh and by the way… Since your sales team is already crank­ing the num­bers and the MT is watch­ing over it, rest assured no pen­ny will go missing. 

To be continued

In com­ing arti­cles I will dis­cuss with you each indi­vid­ual task by each depart­ment. How much time to spend on each task. The fre­quen­cy of each task and so on. Watch me build my empire from day one. Go out and have team-build­ing trips (me, me, me and me at the near­est bar).

And as always….

Thank you

Thank you for read­ing. Please let me know if you like this kind of sil­ly approach to trad­ing. Leave com­ments below. Email me. Do what­ev­er you want. It’s your party!