Most people really shouldn’t take up trading, and we’ve gone to great lengths to speak about just how intoxicating the financial markets can become. People bring with them all sorts of emotional luggage when they sit in front of their screen with flashing numbers and colourful charts. But most of them inevitably throw away years of their lives and money in the attempt tobeat time.
- We’ve spoken about the perils of following the money here and here.
- We’ve spoken about the proper way to approach trading here and here.
- We’ve spoken about the opportunity cost of trading here.
But perhaps it’s time to balance things out and offer one solid reason for going down this path at all: trading (other people’s money) is perhaps the closest thing to a perfect business that there is.
A Word of Caution
It’s no secret that my own parents were (and stil are) firm believers in trading & investing as the ideal “job”. Ever since my high school years, each lunch & dinner table conversation inevitably rotated around the markets and trading. Naturally, I was influenced and headed for a degree in Economics, a masters in Finance and entered the workforce as close to the markets as possible at the time (as an FX Broker).
However that same seed (the idea that trading is the ideal business) also blindfolded me because I never really saw anything else or considered any other career path seriously. Fortunately, I like to stay in touch with global developments, I enjoy studying market dynamics and attempting to uncover more inefficiencies to exploit (within my limitations). So I survived (so far!) but you can imagine how dangerous this route is.
So learn from me: keep your options open, and start by wading into the waters and not jumping in head-first (like I did).
Why Trading Is The Ideal Business
With that said, let’s describe the qualities an ideal business should possess (in my opinion) and see how trading (other people’s money) fits into that picture.
- Global Reach: the ideal business should not be confined to any given city, state or country. The wider the client-base, the more robust the business should be. From this perspective, trading really is global by nature. Sure, there are legislative hurdles but there are no boundaries to the business.
- Inelastic Demand for the good/service: Warren Buffett often speaks of businesses like “toll booths” on European highways. In Italy, for example, you need to pay a toll every time you use the highway. You just can’t escape it. There’s no elasticity of demand there. In the same way, trading & investing produce wealth for clients. Perhaps one day humanity will live in a better world, where money no longer exists (such as Gene Rodenberry’s future Earth in Star Trek), but for the foreseeable future money will always be needed.
- No Close Substitute: the good/service shouldn’t have much competition, or be easily copied. Obviously trading fits this requirement because setting up and running a successful trading business is by no means easy.
- No major investments required: big investments shouldn’t be required initially. Trading definitely fits into this picture. It’s much more about having the time to invest in education, learning market dynamics and building/testing models.
- Geographically Independent: the ideal business isn’t tied to any particular geographic location. This means being able to move where taxes are lower or regulatory requirements are less cumbersome. Trading evidently fits this requirement.
- Free time: like Warren Buffet says “you should find a way to make money while you sleep, or else you’ll be working until you die”. Trading (especially systematically) fits this requirement once everything is built and organized. It’s very labour intensive before that.
- Low regulatory requirements: unfortunately this is where the cookie crumbles. Any time you touch other people’s money, there are a number of regulatory hurdles to jump through. If you have enough risk capital set aside, or you have adecent side income, you can trade your own capital and avoid this alltogether.
Over to You
So it’s true after all: trading is an ideal business venture IF you can make the cut. We attempt to help aspiring traders build and execute their trading models in our Workshop and through1 on 1 Coaching. Trading is simple, but not easy. The only thing that really shortens the learning curve is being in contact with ex-industry traders or professionals that can help you avoid the (numerous) pot-holes and dead-ends that most aspiring traders hit, sooner or later.
If you want to give it a shot, why wait? Get in touch and start building the foundations of your ideal business.
About the Author
Justin is a Forex trader and Coach. He is co-owner of www.fxrenew.com, a provider of Forex signals from ex-bank and hedge fund traders (get a free trial), or get FREE access to the Advanced Forex Course for Smart Traders. If you like his writing you can subscribe to the newsletter for free.