Treat Your Trading As a Business - Part 3

You. Hi, Brian McAvoy here with Inside Out Trading on YouTube I'm known as Trader Brian and today we're talking about how to treat your trading as a business. Part three, the role of the owner investor. And it's really important that you understand that this is one of the most important roles that you play as a trader or within your trading business. I should say you are the owner investor in the business, you are the manager of the business and you are the invest employee trader. So this role, I want to focus on this because it is so important, it's kind of over everything else type perspective. More than likely the reason you got into trading is because you're wanting to have your money work for you. Instead of just having money come to you through your own sweat and time out of your life invested, you want to have your money working for you. And trading does offer better returns than other places. But there are literally hundreds of ways for you to make money if you have money. And it's important to understand that you could just get into purely passive investing where you put your money on a CD or mutual funds, buy and hold long term stock purchases. You could be a venture capitalist, you can buy real estate. There are a lot of different things. You could start up a non trading type business. You could buy a franchise. I bring this up and I love this topic for a particular reason. Franchises are a business where when you buy a franchise, you're buying a proven business system. The neat thing about it is it runs without key people in place. The system stands on its own. And whenever somebody's buying a franchise, they're buying it because they want a proven business. They don't want to have to figure everything out. And eventually they like to get to where the business is running without them. Now there are some key questions that franchise buyers will ask and they're always part of the presentation and it's because they're necessary from an investor's perspective. And you should look at them with, with regards to your trading business as well, of course, what's the initial investment and is it going to be a one time investment or is it going to be ongoing for a period of time? The next question we want to ask is what's the payback period? It's going to take six months, a year, two years, five years, 10 years before I get all my initial investment back. Business owners understand this. Business buyers, investors, I mean you want to get your initial investment back out of it and then have that investment vehicle perpetually giving you an income stream. But you Want to get your money back out of it. So those are the three real important questions. What's my initial investment? What's my expected payback rate? And the third question is what's the realistic return on my investment? And those are three real important questions. Now from an investor standpoint, it's important that you have those three questions in mind because you should have a pretty clear idea of what your financial objectives are with the money that you have to invest, whether it's in trading or whatever you decide to do with it. You need to know what your financial objectives are and of course your personal objectives. Your financial objectives are going to drive your overall approach to what you want to do. And the importance of having them fairly clear is if whatever it is you're looking at, if the financial objectives are not going to be met, then none of the other details matter. That's bottom line. Looking at it strictly from an investor standpoint, if the financial objectives aren't met, then nothing else matters. So it is your money, it's your hard earned money. So protecting it from that standpoint as an investor, that's really important. Now the other thing about understanding financial and personal objectives is that's going to drive your overall decision making. As far as how you get into trading, there are lots of different ways to trade. We have the different arenas within which to trade. You got forex, stocks, futures, CFDs, there's a lot of different arenas and we have all the different markets within each of those arenas. And then of course there's 100 different ways to trade. So it's not like you're limited on opportunities and options on how to go about it. The thing is, your financial objectives are going to if you've got them cleared, and that will help you filter out what you want to look at and what you don't want to look at as far as your overall trading strategy. And here's part of what I'm talking about, if you are. Well actually let me get into a little more detail. First, the other thing about your financial objectives, when you're looking at an overall strategy, the different trading strategies present different opportunities and have different resource requirements. So here's what I want to get in the example, say you're looking, say you decide you want to get into stocks and you are looking at two different stock trading strategies, general strategies. Well, a trend following system is not nearly as likely to have as many opportunities as say a day trading strategy. So it's going to be a number of opportunities, the ability to produce income, plus the different Strategies, even within the same general strategy will have different resource requirements. You may have two stock trading strategies or one has three times the risk capital requirements to produce the same dollar return per trade. So again, going back to your financial objectives are going to give you the decision tool as far as how you're going to approach your trading. And then of course, once you figure out your general strategy for trading, then you can start making your system selections. And if you understand again the opportunities, the realistic rate of return, the resource requirements, that kind of stuff, and of course, understanding that there is going to be a startup period. Every business has a startup period. No business, unless it's purely passive can be at its mature standpoint from day one. If it's involving people doing things, there's going to be a startup period. And all business owners understand that there's a period where you're not expecting the business to make a whole lot of money. Everybody's figuring out how to do everything. So it takes a little bit of time and you've got to make sure that you're going to get through that period. The other importance, even if you started your trading a long time ago, it's important for you to periodically step into the role of owner investor, looking at your trading business to make sure that the objectives are continuing to be met and if they are, great, and if not, then it tells you I need to take a different look at things, maybe look at my other options. The role of the owner is critical in trading and it is important that you step into it now if you'd like to save yourself some time. In my book, the Subtle Trap of Trading, I do cover a lot of the different business aspects as far as how to set up your trading business, the different elements of a business, how to get yourself organized. So if you'd like to get a jump ahead on things, kind of do your homework ahead of time, you can swing by InsideOutTrading.com and pick up a copy. And if you just want to watch the free videos as I produce them and publish them, that's fine too. It's strictly up to you. But please do make sure that you get in on this information. I'm doing it to help you because as far as trading and trading as a business, it is so crucial and has tons of benefits when you do it. The problem is a lot of people don't know how to go about it. That's why I'm producing videos anyway. It's trader Brian on YouTube. Brian McAvoysideouttrading.com I wish you the best, and we'll talk to you soon. Cheers.