#3 – They don’t treat their trading like a business
Did you know that over 65% of businesses fail within the first four years? There are a multitude of reasons why businesses fail, such as poor location, insufficient capital, lack of experience, competition and personal use of corporate funds. Does that sound really familiar to what you’re experiencing with your trading? A lot of those reasons are the same reasons why traders fail as well, except that the failure rate is much higher – usually at 90%. It’s even harder for traders to become successful compared to normal businesses. So how do you start and maintain a successful business and/or trading career?
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When most people begin thinking of starting a business, they believe that having your own business will afford you more time and freedom. They don’t realize that they are the final contingency plan when anything goes wrong. In other words, they will have to work longer and harder than anyone else in their business because no one else will have as much invested as they do. Most new traders think that they can learn a trading system and just show up in the morning and be successful. This couldn’t be farther from the truth. I am certain of this because that’s what I originally thought when I first started trading. In the beginning, you will need to spend hours and hours learning your trading system. As your level of understanding increases, you will need to spend time watching and trading the markets. This will help you get a feel for the markets. Then you will have to work on your daily preparation and trading psychology. Until you log several thousand hours of work, you will need to focus a majority of your time learning as much as you can about trading and about yourself.
In addition to the time and effort you must spend, it takes a sound business plan and execution to create a successful business and to become consistently profitable in trading. A business plan creates a direction and framework for your business and your trading. An effective business plan will detail your goals on paper, how you’re going to achieve them, and what your budget will be. One of the main reasons you want to create a business plan is to give yourself the opportunity to think about exactly what you want to do when you’re trading. If you try to decide on a course of action in the heat of battle, chances are you’ll mix some of your emotions with your decisions. Also, if you ever get off track, you can always refer to your business plan. But even if you have the best business plan in the world, if you don’t execute it well, you still will be closing your doors or blowing out your account. You need to have the discipline required to execute that plan to perfection. Developing your self-discipline is a very important part of becoming consistently profitable. There is no one looking over your shoulder to make you keep to your plan. So you can be your own best friend or worst enemy if you don’t work on your self-discipline.