Business Strategies Can Really IMPROVE Your Trading Performance

Hi, Brian Macavoy here with Inside Out Trading. And today we're going to talk about something. It's kind of cool. This is from the business world I've gotten reintroduced to or have my attention brought back to, and it's really cool. Something from the business world. I love, I love looking to the business world for things that pertain to trading because they're almost always helpful. And in the business world, there's always tons of challenges going on. And whether it's psychological or operational or financial or whatever, there's all kinds of stuff I was going on in the business world that as traders and if we're paying attention, we can go over to the business world, we can borrow some of the stuff that they've got going on, some of the ways they've figured out to beat some of the problems that we deal with as traders, and we can borrow their solutions and bring them over here and make use of them. And it's cool. And the thing that I'm talking about today, you might have heard about it. The book's been around for actually quite a long time, but it's really, it's a foundational book in business and it's absolutely worthwhile. Absolutely pertains to trading. What I'm talking about is the book the Goal by, and I hope I say his name right, Eliyahu Gold Rat. He wrote it back in 1984, and it's called and what it's about. And what he talks about in the book is the theory of constraints. Kind of cool. And essentially he was in the book, he was referencing a manufacturing operation. But the whole theory of constraints can be applied to any business. Doesn't matter what kind of business you have, whether you know, manufactured products, you deliver services, financial business trading, doesn't matter, which is cool. And the whole thing about the theory of constraints is every business, you've got processes that go on that you have inputs and you're producing outputs. And along the way there are various steps and again, inputs to the process. And so with the theory of constraints, it's saying, well, like he was talking about with a factory, you're going to have certain lines or steps in the process of manufacturing your goods. And what you want to look at are the bottlenecks and address the bottlenecks, because if you're not addressing the bottlenecks, then of course it's going to affect the output. And there were three objectives that he had with the theory of constraints and the application of it. And one of them was to increase output. So Greater profits, greater revenues for the business. The second part of it was reduction of inventory and work in process. And the third part was improving efficiencies and lowering cost. And so with trading, it's like, cool, yeah. We're looking for, you know, more revenue, more money tied up in things. And we want, yes, of course, reduce our cost.

Cool.

Yeah. So now as far as applying the theory of constraints, sometimes in the complex process, not where we don't have just a linear process, sometimes it's sophisticated things. It gets a little challenging as far as like saying, okay, yeah, what actually is the main bottleneck and the difference between a bottleneck and a constraint? A bottleneck is worth where flow gets slowed down. There's one process that's holding everything up. You can look, you think about it like the weak links in the chain, but the constraint, every business is going to have one primary constraint and that constraint is the one bottleneck that's limiting the production of the entire business. You might have bottlenecks along the way that affect a portion of the production, but you're going to have one constraint, one of them that's really holding back the entire business. And the cool thing is when you can address that constraint now, man, it's like taking your foot off the brake. Think the business grows.

Cool.

And so, okay, so with trading, we have various inputs to our trading process. Well, we've got the, the markets, of course, you've got your cat, you know how much capital you have to work with and your broker, your access and ability to trade, what, what you're going to be trading. You got your strategy or strategies that you're using. That's another input. We've got you as the trader and the decisions that you make and your execution. And so it's really important that when you're trying to, you're looking at your trading is what's holding up my trading, where am I losing money? And if I can identify like the biggest constraint, it's going to free up everything. And so the reason this is really good to look at is with trading, you're generally going to have your biggest constraint in one of two places. And like I said, we do it. There are several factors here. If your goals are to say, make 10 grand a month so you can have just a decent retirement, okay, then you're going to have certain capital requirements and then that's going to drive your trading decisions as far as your strategy that you choose, your risk management, your trade sizing and all that position sizing, all that kind of stuff. And your trading style. You know, how frequently are you, are you going to be a day trader, you're going to be an end of day trader, you can be swing trader and the long term position trader, those are the different factors that come into play. So your, your overall strategy for your business, your capitalization and your expected rate of return, big deal here. And then again the strategies that you're using and then there's you. And what I've found and that I like about this, what I've found, if you say, wow, I got all these different things that I could work on to make better in my trading, where am I going to get the biggest bank for my buck? If I put my effort in here, in whatever the different ones, where am I going to get the biggest return on my investment of time and money and effort? And almost invariably every single time, yeah, almost every single time I put in the upper 90s, the answer is going to be use the trader. Because your capital, fortunately nowadays is not even really the hindrance. You can get a prop firm to give you a funded account and bam, you've got access to the trading account size that you might need for the given return that you want. And then as far as putting together your investment, your strategy, like I was talking about, as far as achieving your roi, you know, how big of an account you need, what strategies are you going to use, all that kind of stuff. Okay, those also stem from you because you're going to have to sort them out and decide what business strategy you're going to employ here. And the execution of your strategy, that again, that comes back to you and being able to take a strategy and hit that skill level with it, that you can go to a prop firm and get funded at the level that you want. Again, it also comes back to you and I know a lot of people fuss about prop firms and if you're not even thinking about going there as first prop firms, you're sitting on $100,000 account, $200,000 account, you want to trade again. Still, you're probably the biggest constraint in your trading business because almost nobody gets really adequate and sufficient training, proper training for this job and for this business. And so the challenges that you run into, the limitations, the lack of profitability, the lack of effectiveness, the difficulty with filtering through all the myriad of decisions that you have to make as the owner of a trading business, that all comes down to your training. And did you get the kind of training that you need to be good at this position because you are the investor in this Business. You are the owner of the business. You're the manager, the startup manager of the business and the planner. And you're the day to day manager and you're the trader. You wear a whole ton of hat. I mean, you got quality, you got a canon. Seriously, you're wearing all the hats and there are plenty of hats to wear. You're not just a trader trading, you actually have a financial asset if you'll treat it like one. If you want to make it, you know, something significant, you have different hats to wear. And so the, the more trained, properly trained you can get. So you have the full set of skills to be really good at this, to make it what you want. To give you that, you know, 10, $20,000 a month paycheck that you're looking for, it requires skills. And so long as you're, you know, short on those skills, you're going to be the constraint. But when you do get the skills, if you invest in yourself instead of just throwing money at the markets, you invest in yourself, you get yourself skilled up.

Cool.

Now it's going to get easy. And now if you do, even if you've got the, you know, the capital to trade, if you want to go, if you want to use a prop firm's funds, I got plenty of clients that do that. They've got, they got plenty of money to trade their own account, but they choose not to. They choose to, you know, use the prop firms account. Fine. But the thing is, with prop firms, just like if you're trading your own account, the markets and the prop firms are going to insist that you bring the skills to make money as a trader. If you're shortcutting and you know, you just say, oh, you know, I just want to jump into this and you know, I just want to start trading and making money and you don't pursue scaling up, the markets will punish you. And the prop firms, you'll just keep getting funded and losing your accounts. Happens all the time. But if you show up and you bring the skills, you're bringing the game that you need to bring, hey, the markets will welcome you all day long. You'll make money all day long. It's cool. Prop firms are the same way. You show up and you, you demonstrate the skills to trade and make money, hey, prop firm, yeah, they'll give you the account. They'll, they'll give you the funded account because they're, you're helping them make money too. So that's really the cool thing about it. And like I said, if you look at all the different things that you could put your time and effort into, though. I'm going to find a new strategy. Stop chasing strategies. That's not your constraint. You know, you're thinking you've got some, you know, deep subconscious issue that's got you screwed up for making money as a trader, but you've been able to amass, you know, $250,000 to trade with. Well, you probably don't have the psychological issue with money. So stop spending your. Stop investing your time there. That's not your constraint. Again, the constraint is probably the lack of training, the lack of skill sets. Something is missing in your abilities and your understanding. That's why you're not where you want to be. And when you can get those answers, get that training, get those skills, get that knowledge, get that experience with your own hands. Yeah. Now, now you've removed the constraint.

Cool.

Now everything else can open up. Now you can start looking at some of the other things that now have become the constraint. Oh, yeah, you know, my strategy that I was working with, now that I know what I'm doing. Yeah, that strategy really wasn't that great. Now I know what to look for and I know how to take it to the market the right way.

Cool.

So anyway, I hope that's been helpful. And like I said, going to the business world and finding solutions in other industries where people are dealing with difficult issues that we as traders are wrestling with, but they found a solution to it. It's like, hey, let's go see if we can borrow their solution and apply it to what we've got. That's how I turned my trading around was I was in quality assurance and I was fighting consistency issues and not being able to settle down and trade consistently. And that's what, that's what I brought from Quality Assur was how to do that. And when I did and it turned everything around, it was cool. So anyway, like I said, borrowing solutions from other industries, I mean, that's why it's really good to just as a trader, but just also just as a person. You know, always be a learner. Be seeking to learn and understand and grow as a person and as a professional. It'll help you become more successful in general. Also makes for a good conversation. I mean, if you think about it, you know, you're just hanging out with your friends and everything. So yeah, you talk about, you know, you learned this, you discovered this, and you know, the latest book, you applied this to your trading or your job or your business or whatever, or your Family, probably, personal growth, whatever. But if you're always learning and solving the problems of being a human being on the planet, cool. So I know I geek out on this stuff but hey, I hope this been helpful. If it has, give me a like and subscribe down below. Let YouTube know that these are worthwhile. And as far as subscribing to my channel, these are the kind of videos that I make is how to become a successful trader. So if you like this kind of stuff, subscribe to my channel so you get notified when I publish videos. If you have friends, share it with your friends. Post a link to the video on your social channels. And you know, if you got a question, something you want to share, leave me, you know, leave a comment down below. I do read the comments. Got a question you'd like for me to, you know, put out a video on?

Cool.

But also feel free to swing by Insideout Trading.com and up at the top there, if you're having some issues with your trading, it's not where you would like it to be. You've kind of exhausted all the solutions you can think of or you just would like to have a conversation with me about your trading. Book a call with me at the top of the webpage link up at the top says book a call with Brian. Click the link, book a call with me. We'll get on a zoom call like this and we can talk about what's going on with your trading and your best path forward forward to get you past what's currently holding you back. Because the whole point is you want this to be a positive thing in your life. You want to be a good financial asset. You want to be something that you enjoy and enjoy talking about with your family and your friends, your spouse, maybe teach your kids someday. So I'd love to help you get there. So anyway, again I hope this been helpful. Talk to you soon. Cheers.