Working a 9-to-5 job for somebody else is a play-it-safe plan, but at a certain point, many employees become fed up with the rigid schedule and limited options for growing their personal wealth. Running your own business and being your own boss can be a great way out of this scenario. Given that trading is a lucrative field that can result in you making some substantial amounts of money, a trading business might be just what you need – you can have a flexible schedule and work for your own profit.
However, in order to succeed, you need to know a couple of things that will help you kick-start this venture.
Learn the Ropes
Starting your own online trading business has become increasingly facilitated by technological advancements, but it’s a far cry from a “quick buck” scheme. As a matter of fact, success in this business depends on how much you’re willing to learn. The fact that you’ve read a couple of blog posts and seen several YouTube videos on the topic doesn’t mean that you’re qualified enough to start a successful online trading business.
Besides, since a lot of money is at stake, you’d better take this seriously and educate yourself properly. Thankfully, there are some trading options that allow you to test your knowledge before you start investing real money.
Pick Your Stocks Wisely
As you might guess, there are a lot of different stocks to choose from, which means that you have to understand the market before you decide what to invest in.
Luckily, there are a couple of steps to follow in order to pick the best stocks:
- Perform a fundamental and technical analysis to identify the value of a stock and establish whether it’s aligned with your goals and trading strategy.
- Combine a qualitative and quantitative stock analysis to build your portfolio.
- Diversify your portfolio. That way, you won’t be putting all your eggs in a single basket. Spreading the risk among different asset categories, including bonds, cash, and stocks will ensure that you don’t lose all your money.
- Leave emotions out of the decision-making process. This one is among the most important tips for inexperienced traders who are kick-starting their careers.
Have a Trading Plan in Place
Just like every company needs a business plan to succeed, every online trading business needs a sound trading plan. What we’re talking about here is a set of rules that stipulate your entry, exit, and money-management plan for every purchase you make.
Back testing is a practice that allows you to check whether your trading idea is viable without using real money. It relies on historical data and advanced technology to eliminate the guesswork from the equation and help you make data-driven decisions. This will also help you practice with your trading plan before you ever risk any money.
Don’t Risk What You Can’t Afford to Lose
Trading does include some risk-taking, but it’s not gambling. So, before you decide to invest your hard-earned money, make sure that it’s expendable. In other words, the resources on your trading account should be saved or otherwise obtained for that purpose only. It’s a terrible idea to “borrow” money from your kids’ college savings or take from the money you have put away for other expenses.
Always Use a Stop-Loss Order
Minimizing your risk is the best strategy in the trading business, and a stop-loss order will help you do this by protecting your investment from spiraling out of control. It’s a predefined and agreed-upon level of risk, expressed in a percentage or a dollar amount that you’re willing to accept. It’s a good idea to use this strategy for every trade you take.
A stop-loss will make sure that you know exactly how much money you can lose if a trade goes south, and this can take a great deal of stress out of trading.
Be Patient
Impulsive trading and buying stocks only because they’re hyped up isn’t recommendable. These kinds of practices can have a negative impact on your trading business and make it stagnate, which is very frustrating.
It’s crucial to grow your business gradually and avoid making hasty decisions – at least until you’re experienced enough to identify potentially bad trades. Don’t expect that you’ll strike it rich right off the bat. Instead, wait for the right opportunity to come along and act on it.
Set Up the Right Trading Entity
A clearly defined business structure is a must, especially because it will determine your future taxes. Opting for a Limited Liability Company (LLC) is the best solution because of its many advantages like protecting your personal assets from being at risk in the case of bankruptcy or lawsuits and helping you avoid hefty corporate taxes.
An online trading business offers a lot of advantages and opportunities to make money, but it requires you to understand the rules and follow them. If you’re hard-working, patient, and disciplined, online trading might be just the right career for you.
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