There are many traders who view foreign exchange as an alternate means of making some money. It’s a method to engage in some profitable trade without having to ‘got out and work’. However, it is important that one discard that notion if you are to become a successful trader. One might question this, particularly if you are a part-time trader. Regardless of your trading frequency the benefits of seeing forex trading as a business venture are numerous. This article examines these advantages.
Forex trading with a plan
When starting a business it is important to have a plan of action. Without a suitable and well thought out plan of action there is a great chance the business endeavour will never present past the introductory phase. The principle of the forex trading plan is identical to that of an entrepreneurial plan of action.
When compiling a business plan one must have particular goals and a clear, direct pathway to reaching these goals. A trading plan requires trading goals and the trading strategy which will assist in reaching the specific trading goals established. Furthermore, one must determine whether these trading goals are monetary targeted or process targeted. If they are process targeted you must focus on the calculations of profits and losses when working towards your goals. If they are monetary the strategy should look at lessening any trading pressure.
Keeping documentation of forex trading
As forex trading is not often viewed as a business venture the act of record keeping is generally neglected. Whether or not you view your trading as a business it is always an advantageous behaviour to collect documentation on all the trades you conduct. The simplest way to maintain a record is via a trading journal. While many traders do still have hard copies of this journal, there is the option of keeping an online trading journal to lessen the load of paperwork. It is recommended that you keep both an online journal and a hard copy should something happen either of the copies.
The trading journals will hold documentation of all your trades and all aspects of these trades from the analysis to the point you used to trade. You must record all results experienced from each trade as this will assist in future analysis when conducting performance reviews. These performance reviews must be completed on a regular basis to ensure your strategy is still appropriate for your trading type at the present moment.
As may be seen a trading journal is very similar to a business portfolio. It has been seen that traders who keep trading journals have started viewing their trading careers as a business and showed more effective behaviour on the market.
Some final words on the matter
As may be seen there are benefits to viewing one’s trading career as a business venture, however the overall advantage more psychologically based than behavioural. As can be seen with the trading journal one’s perception changes from an average trading to that of a business professional. Plus, when viewing the trading plan as a business plan of action one approaches forex trading in a more structured and effective manner. By implementing this professional approach into you trading system and style one will show a more objective mindset and less susceptibility to emotional trading.