1-Treat Your Trading Like a Business!

Treat Your Trading Like a Business! Lesson 1

The entry price to being a trader or investor is fairly low. All you need is enough money to open an account. Your broker doesn’t care whether you understand expectancy or objectives. Your broker doesn’t care whether you understand that position sizing is the key to meeting your objectives. And your broker certainly doesn’t care that you must have your personal psychology in order for any of this to matter.

Your broker cares about two things:

1. That you have enough money to open an account, and
2. That you don’t lose many times the value of your account so that the broker gets in trouble.

That’s it!

You can easily open an account without knowing the first thing about trading.

Is this true of other professions? Can you become an engineer without understanding calculus? Can you become a doctor without going to medical school? Can you be an attorney without passing the bar? Of course not.

Similarly, could you play golf against a pro and expect to win if you’d never before stepped on a golf course? Would you compete in a chess tournament against a master player if you’d never played before? Obviously not, but even if you did, the worst that would happen is that you’d lose a few games (and perhaps a measure of pride).

But what do people lose in the markets? Anything from a few dollars to their life savings, and yet there are no rules about who should or shouldn’t be in the markets.

Day in, day out, people jump into the markets recklessly, without experience, without training, and most definitely without any type of formal plan. In fact, your broker may not even know the real nuances and fundamentals of safe and profitable trading herself. In fact, more often than not, people who open a brokerage account will lose money rather than make it.

If you are serious about being a good trader, you need to approach the practice of trading with the same level of rigor you would apply to any high-level endeavor. The market does not owe you or anyone else great riches. The market does, however, occasionally tease a large number of people with seemingly easy gains (during bubbles and other manias), only to take them away again.

Trading is a business. It’s a profession. It’s a skill you have to learn.

Have a Business Plan!

Most businesses fail because they fail to plan.

Business planning is the backbone to success. It shows you where you’re coming from, allows you to organize your thoughts and objectives, and helps you come up with a plan to keep you in the markets and trading successfully for the long term.

Van recommends that traders and investors develop a thorough business plan to guide their trading—even if you’re already trading well. In fact, it’s an important part of the work he does with the students in his Super Trader program. They are expected to complete very detailed plans before graduation is even considered.