Thread by @SJosephBurns

Trading as a Business:

A thread 🧵👇

To make money in the markets you need to be trading like a business. Hobbies cost money, businesses make money. A business has a plan, a process, and a system. A business has customers that it sells products to for more than their cost.

You can’t open up your trading business to having capital at risk until you have a full system with an operating trading plan that has an edge. A positive expectancy model is needed for profitability.

Your business inventory is your current positions; you have to buy them for less than you intend to sell them for. Whether it is buy lower and sell higher or buy high to sell higher there must be a gross profit expectation.

Your customers are who you sell to; they have to be willing to pay more than you bought your positions for.

Losing trades are the cost of doing business. They are your shrinkage. Your stop losses and position sizing are your loss prevention department.

Liquidity is the most important fundamental for inventory, you don’t want to get stuck with unmovable merchandise. Trade where there is volume and tight bid/ask spreads.

Your trading psychology and mindset is the manager of your business; you can’t let fear, greed, or ego lead to an unprofitable error outside your system.

Your business must have insurance to manage risk. Exit strategies, diversification, and hedges are your insurance against big losses.

Location is everything. You must conduct your business on a chart price level where there are ample buyers and sellers so you don’t get stuck with positions that no one wants.

Your current trading positions are like your employees. You are a good boss to keep the ones that are productive and produce profits, and fire the ones that are unproductive and lose money. Let winners run and cut losses short.

Expansion of your business can only happen after your first buying and selling location is successful. Once you have mastered a system of entries and exits you can add new markets and signals that also have an edge.

Your trading capital is your business. Lose all your money and you lose your ability to operate and are out of business.

The only reason to be in business is to make money. If you don’t make money, you need a new profitable business plan.

Trading like a business means operating inside a systematically profitable process. Trade like a business not like a gambler, hobbyist, or for entertainment.