Trading as an Investment: Are You Screwing Yourself Over With Your Current Game Plan?

So the question really is, are you screwing yourself over in your trading? And I'm not talking about with the mistakes and you know, doing things that hand money back to the markets. I'm talking about from the get go, even just the way you're getting into your trading. From a business investment perspective, are you even getting into it? Like, like I said from the beginning, I mean, let's take a, let's take a look at it. If you were buying another business, you know the business is going to be worth something. You expect it generates certain revenues. But one mistake people make when they look at buying another business is they don't account for certain things that business needs to produce. I mean, of course it needs to produce a profit, but that profit needs to take care of the company. It needs to return, you know, provide a return on your investment capital that you put into it. But if you're going to be working there running the business, it needs to be paying you for your time. And if you had to borrow money, you know, to capitalize the business, which often happens, you know, when you're, when you're buying a business, investing in a business, you know, covering that debt service. So let's assume that you know, you're not borrowing money, but you still need to get a good return on your capital, sufficient, better than you would get elsewhere because otherwise you have an opportunity cost here. But you really do need to be getting paid for your time. And of course, yes, it is going to take a little bit of time at the beginning where, yes, you're investing more time than would be normal because you're getting the business up and running. But that really shouldn't take very long. And even then you should still be getting paid for your time. Your time, your labor has value. Now here's a perfect example. Let's say you're doing your trading and you have a goal making $100 a day. Okay, $100 a day. Let's see, if you're working an eight hour job, $100 a day, that's $12.50 an hour. Do you really want to be working for $12.50 an hour? And that's not even counting a return on your capital. That's just paying you for your time. Okay, let's say you're only investing four hours a day, which really isn't realistic. Because if you're a trader, you know, you have your time in front of the charts, but you have your prep time, you know, your, your after time where you're reviewing your trades, journaling you're thinking about your trading. It's occupying more than just the time that you're actively trading. So your time investment for your trading, for a lot of traders, even part time traders, yeah. It's still eight hours a day plus. And again, are you getting paid for that time or would you be, would you be better off? I mean, heck, you can make 25 bucks an hour mowing lawns or, you know, waiting tables in a restauran. I mean, there's tons of entry level jobs that you could just go do today and make 20 or 25 bucks an hour. Plus again with your trading, you have your money at risk out there. Are you being properly compensated for the risk? So, you know, let's take a look at, you know, if you are investing in another business, you would want that margin, that profit margin to be fairly significant, right? I mean, you wouldn't want to like open up a restaurant and be rolling $100,000 through that restaurant every month only to realize $2,000. No, 2%. No, you wouldn't want to do that. You'd want it to be up around 5, 8%. Right. Minimum. Preferably higher than that. I mean, if you look at some companies, their operating margins are a lot higher than you would think, even for big companies. Here's a perfect example. I heard this years ago and it sounded to be absolutely true. Pepsi, PepsiCo, they had budgeted in their annual budget, 35% of their revenues went to marketing. So they had a big enough margin to cover all their operating expenses, all their cost of goods, everything, and then still have 35%, 35% just for marketing and then making a profit on top of all that. So their gross margin was huge. Still is in Coca Cola. And that's. Yeah, and that's why Coca Cola is one of the top companies in the world. Their margins are insane. They're not working for, you know, 8% a year or 10% a year. They're making way more money than that. Are they reinvesting it? Of course. But I'm just saying their margins, you know, on the onset are crazy. And so, you know, as a trader, you're putting your money into this, you know, into this business you want to have, especially since it is a risky business, you want to have a pretty good return on your capital and not just a few percent a year or even a few percent a month. Really, Seriously, if this was a business, you would want to be making a pretty decent margin by the end of the year. And again, you have to include your time now first Business lesson here, you've heard of EBITDA before earnings, before interest, taxes, depreciation and amortization. That's generally the profit of the business. And so you know, that needs to be significant and reasonable for anybody to want to invest in the business. Small owner operated businesses, there's a different term for it. It's called seller's discretionary earnings. It's like ebitda, but you have to factor in the fact that as the owner, operator, you have a job and your labor needs to be factored into that right there. So let's say, yeah, with your trading, you're saying, okay, I'm going to, you know, I'm going to put in $50,000 and you know, I'm getting a 20% return. That's pretty good. You know, hey, wait a minute, 20% a year, that's 10 grand. Now if I'm putting in 10 hours a week, 50 weeks a year, let's see, okay, that's 500 hours of my time and my time's worth at least 20 bucks an hour. Well, heck, there's my 10 grand. It's only covered my labor. I haven't really gotten any return on my capital. I've only gotten paid and I only got paid 20 bucks an hour. Okay, this is what I'm talking about. This is where a lot of traders, they go into it and they don't think the numbers through and they don't look at, they don't value their own time and the opportunity cost of this, of this business. It's like, okay, are you going to get into it with enough capital that it justifies your time and provides a sufficient return? And if you can't do that, then you need to say, okay, am I willing to, how much of my time, my life am I willing to sacrifice at below standard wages where I could go do something else and make the same kind of money? I'll take my capital, I'll put it over here in a CD where there's zero risk. I might only make a couple percent a year, but at the end of the year I put my capital over there, I put my time in over here and at the end of the year I'm ahead, I'm making more money than if I were trying to trade putting my money at risk and, and not getting paid for my time. So you need to run the numbers. And so if you're trying to trade, you know, with a $500 account, is this really the best place for you to be putting your money or do you need to go figure out how to run more capital. Now, this is where prop firms can come in handy. But again, let's say you have $5,000 or $10,000 and you want to get into trading.