Honestly I can't define the trading business enterprise. The term entrepreneurship I think is more just tie it to an activity aimed at the production of goods or the provision of a service that benefits society. By trading, this does not happen the goal is to create money by speculating on the movement of prices of financial instruments. However, anyone who wishes to undertake trading activities, if he/she wants to have success, should consider trading as a business and manage it just like you are managing a business. A professional then, (because only a professional can undertake this activity), before making any operation must carry out his/her plan of work. He/she will then define what is the capital they want to risk in this business, which in economic terms are the objectives he/she intends to achieve, what are the tools they will use for the achievement of objectives, how quickly they review and update the plan. Write on paper all these elements in a periodic update, allow the trader to be in control of everything that happens, he/she will manage the trading as a business. Without a business plan for the trading, the possibility the trader becomes a gambler are very high.
How to write your trading plan?
- First you define the capital to be used for trading and the capital that you are willing to risk.
- Then you will define the objectives to be pursued in terms of economic return.
- According to the first two elements you will decide the tools to use: In which market to operate? On which tools to operate? Timing with which to work (scalping, intraday, multiday) As which capital to employ for each trade? What are the inputs of the operations? How to manage operations (stop loss and take profit)?
- It defines how frequently you have to check the results and adjust your plan.
Obviously only those who have a huge knowledge of the markets and of itself, will make a perfect trading plan for himself. Imagine the trading floor of an anxious and a calm person. An anxious person will prefer to operate in multiday with low amounts, maybe stop loss wider, with input. A quiet person may make scalping, operations of a few minutes with high capital.
With no doubt some operations, although less frequent, are more likely to succeed than others, take for example a trade intraday on the breaking of a large trading range. Precisely for this reason we believe that the third point is dependent on the first two. If for example, I wanted to start in a very cautious way, my plan could be expected to operate only on trades with a high probability of success, even if it means working once a month. In the case of positive results, the plan will always be updated.
It is clear the subject is so complex, it would take a series of books to describe it. But the concept that we want to convey is that without a “written plan", defining objectives to be achieved and the risks that are to be run without a written plan that defines that method-use strategy for the opening of a trade, they are likely to go out of business, winning would be close to zero. These concepts seem trivial, yet just attending forums, groups related to trading and you realize that most people do trading without a plan. Having a trading plan obviously means recording scrupulously all its operations and therefore its results. Recording their results on an ongoing basis, brings the person doing the trading face to face with the reality, and not always a person who makes trading wants to deal with it. In order to carry out the activity of trading it is necessary, as well as being a trained professional, being an honest and sincere person will allow the trader not deceive himself.