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…
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.
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.
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
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.
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 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!