Treat Your Trading Like A Business


You're The CEO, Your Strategies Are Employees

While I don't want to get too deep into a "mindset" type of discussion, I think it is at least worth exploring the concept of viewing your trading career as exactly that, a career. This is something you should be considering as a long term business investment, not for short term gains. 6 months, 1 year, 5 years. Will you still be trading? Or will your business go bankrupt?

 

Your Strategies Are Your Employees

You should treat your strategies like employees. If they're not working for you, do a performance assessment, and if you find that your strategies are failing you, fire them. This doesn't mean your employees can't take a vacation for a week or have a difficult time for a short period (i.e., drawdown periods). It means that if your strategy performance is failing what you expected from backtesting (win rate, drawdown, max losses in a row, etc.), then you should consider a new strategy.

 

Losing Is A Business Expense

Every business has expenses, right? Monthly service subscriptions, random losses from incurred fees and taxes, etc. Losses in trading are part of this expense. In order to make money you will have to lose money. No strategy wins 100% of the time long term. Losing is inevitable. If you train yourself to take emotion out of trading and recognize that losing trades here or there is part of your business expenses, it can be less strenuous on your emotional state.

 

Controlling Emotions Is Key

One reason we advocate for bot trading is to remove human emotion from the equation. While it's not foolproof, as you will know when you're in a trade, it is a key component to removing bias and emotion in trading.

 

  • If your strategy hasn't sent a valid signal, don't suddenly FOMO (Fear Of Missing Out) into a trade just because the price is pumping in your favor. There is always another trade.

 

  • Don't close losing trades prematurely. Closing trades prematurely could cause you to miss out on possible gains if the trade turns in your favor before reaching your stop loss! It also skews the results making for unreliable review data.

 

  • Don't close trades part way through profit. If a trade is going in your favor, after a couple of losses, in can be tempting to revenge trade and close a profiting trade early to try to recover losses. This is a MISTAKE. You should allow allow your trades to fully play out and stay out of the way. You set those targets for a reason. You have a trading thesis. Don't get in your own way. As the CEO, this is the rough equivalent of micromanaging your employees. Let them work for you!

 

Conclusion

Every business suffers setbacks, downturn, and incurs losses. The important thing in running your trading like a business is to not let your emotions control your decision making, and stick to the business plan you laid out. Success comes in waves, it comes slowly over time, and you should always keep your mindset as a business owner in this way. Analyze your trade histories, find areas of weakness and improve, and stay the course.


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