What are the Phases of a Trading Business

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What are the Phases of a Trading Business
As new traders, or those who have gained a new vigor in the pursuit of success, we must understand that the road ahead of us will not be easy, nor will it be a quick journey. The path that lies ahead is filled with daily challenges that will test our skills, both technical and mental. In fact, most traders fail to progress past the start-up phase. They fail to learn: To take a loss To be wrong That, to succeed, they must take the time required to learn! It takes time to become a successful trader. At least a year maybe 2 years, but this business has nothing to do with instant success. Quite the contrary: Most successful traders say that Survival is the first key to success. Expressions such as “Love to take a loss” or “Keep the losers small” all provide big clues that, indeed, we must survive to prosper. Some characteristics of the 3 identifiable phases that occur in trading as a business. Typical Progressions of the Start-Up Phase of a Trading Business We: Are lured by money Perceive a low barrier to entry Are influenced by “Peer Pressure” news hype See that a friend did this and that Read a few books Go to a few seminars and get all that is freely available online Find some speculative capital Trade Win Lose Lose Find we need the right tools but think we can't afford them Think, "I need to try something more difficult," even though we don't understand what we just tried nor do we have the tools or the education Lose more Understand that we truly do need to work on "planning" and a way to shift our emotions from an adversary with respect to our goals to a powerful force that guides our actions Finally, understand that it is okay to take a loss (In fact, we discover that this was the first lesson we needed to learn to survive!) Survival is actually the goal for the start-up phase. So, then, we graduate to the Growth Phase. Typical Progressions of the Growth Phase of a Trading Business We: Make a commitment to getting education and the proper equipment Actually learn something Plan Trade with better results Decide to make it complicated for some stupid, unknown alien reason Lose patience Lose Simplify again, refining Now understand the importance of patience in all of this Take more risk Are slaughtered by the market(s) even worse than ever before Now have trouble pulling the trigger when the set-ups are very clear Begin to understand the importance of discipline Discover the mechanics of trading Learn the life cycle of a trade Commit our capital as planned, using strict money management Get better Start actually accepting responsibility for our own actions Stop searching and start focusing (That is the key to graduating to the Maturity Level.) Typical Progressions of the Maturity Phase of a Trading Business We: Are patient in our endeavours Are disciplined enough to trade our plan Understand leverage Practice strict money management Take less and less risk, preferring to use size on stronger signals Learn how to handle huge dollar profits but keep our perspective (return on investment versus time to money) Find out how to handle huge dollar losses but keep our perspective (return on investment versus time to money) Truly understand the life cycle of a trade and can plan accordingly Commit to a lifetime of education and learning Now trade on auto-pilot, choosing to participate when the best risk: reward ratios exist Make our main priority to trade our plan The bottom line is that many people have travelled this path, but very few have succeeded. I think it prudent as we travel the path to be aware of the natural tendencies regarding the progression of ALL businesses and how we can prepare for bettering our odds through the use of the proper tools and education, as well as serious planning for each phase.