trading business business plan

Trading Business Plan Template

Written by Dave Lavinsky

Trading Business Plan

Over the past 20+ years, we have helped over 500 entrepreneurs and business owners create business plans to start and grow their trading companies.

If you’re unfamiliar with creating a trading business plan, you may think creating one will be a time-consuming and frustrating process. For most entrepreneurs it is, but for you, it won’t be since we’re here to help. We have the experience, resources, and knowledge to help you create a great plan.

In this article, you will learn some background information on why business planning is important. Then, you will learn how to write a trading business plan step-by-step so you can create your plan today.

Download our Ultimate Business Plan Template here >

What is a Trading Business Plan?

A business plan provides a snapshot of your trading company as it stands today, and lays out your growth plan for the next five years. It explains your business goals and your strategies for reaching them. It also includes market research to support your plans.

Why You Need a Business Plan for a Trading Company

If you’re looking to start a trading company or grow your existing company, you need a business plan. A business plan will help you raise funding, if needed, and plan out the growth of your trading business to improve your chances of success. Your business plan is a living document that should be updated annually as your company grows and changes.

Sources of Funding for Trading Companies

With regards to funding, the main sources of funding for a trading company are personal savings, credit cards, bank loans, and angel investors. When it comes to bank loans, banks will want to review your plan and gain confidence that you will be able to repay your loan and interest. To acquire this confidence, the loan officer will not only want to ensure that your financials are reasonable, but they will also want to see a professional plan. Such a plan will give them the confidence that you can successfully and professionally operate a business. Personal savings and bank loans are the most common funding paths for trading companies.

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How to write a business plan for a trading company.

If you want to start a trading business or expand your current one, you need a business plan. The guide below details the necessary information for how to write each essential component of your trading business plan.

Executive Summary

Your executive summary provides an introduction to your trading business plan, but it is normally the last section you write because it provides a summary of each key section of your plan.

The goal of your executive summary is to quickly engage the reader. Explain to them the kind of trading company you are running and the status. For example, are you a startup, do you have a trading business that you would like to grow, or are you operating a chain of trading companies?

Next, provide an overview of each of the subsequent sections of your plan.

• Give a brief overview of the trading industry.
• Discuss the type of trading business you are operating.
• Detail your direct competitors. Give an overview of your target customers.
• Provide a snapshot of your marketing strategy. Identify the key members of your team.
• Offer an overview of your financial plan.

Company Overview

In your company overview, you will detail what type of trading business you are operating.

For example, you might specialize in one of the following types of trading businesses:

• Retail trading business: This type of business sells merchandise directly to consumers.
• Wholesale trading business: This type of business sells merchandise to other businesses.
• General merchandise trading business: This type of business sells a wide variety of products.
• Specialized trading business: This type of business sells one specific type of product.

In addition to explaining the type of trading business you will operate, the company overview needs to provide background on the business.

Include answers to questions such as:

• When and why did you start the business?
• What milestones have you achieved to date? Milestones could include the number of customers served, the number of products sold, and reaching $X amount in revenue, etc.
• Your legal business Are you incorporated as an S-Corp? An LLC? A sole proprietorship? Explain your legal structure here.

Industry Analysis

In your industry or market analysis, you need to provide an overview of the trading industry.

While this may seem unnecessary, it serves multiple purposes.

First, researching the trading industry educates you. It helps you understand the market in which you are operating.

Secondly, market research can improve your marketing strategy, particularly if your analysis identifies market trends.

The third reason is to prove to readers that you are an expert in your industry. By conducting the research and presenting it in your plan, you achieve just that.

The following questions should be answered in the industry analysis section:

• How big is the trading industry (in dollars)?
• Is the market declining or increasing?
• Who are the key competitors in the market?
• Who are the key suppliers in the market?
• What trends are affecting the industry?
• What is the industry’s growth forecast over the next 5 – 10 years?
• What is the relevant market size? That is, how big is the potential target market for your trading business? You can extrapolate such a figure by assessing the size of the market in the entire country and then applying that figure to your local population.

Customer Analysis

The customer analysis section must detail the customers you serve and/or expect to serve.

The following are examples of customer segments: individuals, schools, families, and corporations.

As you can imagine, the customer segment(s) you choose will have a great impact on the type of trading business you operate. Clearly, individuals would respond to different marketing promotions than corporations, for example.

Try to break out your target customers in terms of their demographic and psychographic profiles. With regards to demographics, including a discussion of the ages, genders, locations, and income levels of the potential customers you seek to serve.

Psychographic profiles explain the wants and needs of your target customers. The more you can recognize and define these needs, the better you will do in attracting and retaining your customers.

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Competitive Analysis

Your competitive analysis should identify the indirect and direct competitors your business faces and then focus on the latter.

Direct competitors are other trading businesses.

Indirect competitors are other options that customers have to purchase from that aren’t directly competing with your product or service. This includes other types of retailers or wholesalers, re-sellers, and dropshippers. You need to mention such competition as well.

For each such competitor, provide an overview of their business and document their strengths and weaknesses. Unless you once worked at your competitors’ businesses, it will be impossible to know everything about them. But you should be able to find out key things about them such as

• What types of customers do they serve?
• What type of trading business are they?
• What is their pricing (premium, low, etc.)?
• What are they good at?
• What are their weaknesses?

With regards to the last two questions, think about your answers from the customers’ perspective. And don’t be afraid to ask your competitors’ customers what they like most and least about them.

The final part of your competitive analysis section is to document your areas of competitive advantage. For example:

• Will you make it easier for customers to acquire your product or service?
• Will you offer products or services that your competition doesn’t?
• Will you provide better customer service?
• Will you offer better pricing?

Think about ways you will outperform your competition and document them in this section of your plan.  

Marketing Plan

Traditionally, a marketing plan includes the four P’s: Product, Price, Place, and Promotion. For a trading company, your marketing strategy should include the following:

Product : In the product section, you should reiterate the type of trading company that you documented in your company overview. Then, detail the specific products or services you will be offering. For example, will you sell jewelry, clothing, or household goods?

Price : Document the prices you will offer and how they compare to your competitors. Essentially in the product and price sub-sections of your plan, you are presenting the products and/or services you offer and their prices.

Place : Place refers to the site of your trading company. Document where your company is situated and mention how the site will impact your success. For example, is your trading business located in a busy retail district, a business district, a standalone facility, or purely online? Discuss how your site might be the ideal location for your customers.

Promotions : The final part of your trading marketing plan is where you will document how you will drive potential customers to your location(s). The following are some promotional methods you might consider:

• Advertise in local papers, radio stations and/or magazines
• Reach out to websites
• Distribute flyers
• Engage in email marketing
• Advertise on social media platforms
• Improve the SEO (search engine optimization) on your website for targeted keywords

Operations Plan

While the earlier sections of your plan explained your goals, your operations plan describes how you will meet them. Your operations plan should have two distinct sections as follows.

Everyday short-term processes include all of the tasks involved in running your trading business, including answering calls, scheduling shipments, ordering inventory, and collecting payments, etc.

Long-term goals are the milestones you hope to achieve. These could include the dates when you expect to acquire your Xth customer, or when you hope to reach $X in revenue. It could also be when you expect to expand your trading business to a new city.  

Management Team

To demonstrate your trading business’ potential to succeed, a strong management team is essential. Highlight your key players’ backgrounds, emphasizing those skills and experiences that prove their ability to grow a company.

Ideally, you and/or your team members have direct experience in managing trading businesses. If so, highlight this experience and expertise. But also highlight any experience that you think will help your business succeed.

If your team is lacking, consider assembling an advisory board. An advisory board would include 2 to 8 individuals who would act as mentors to your business. They would help answer questions and provide strategic guidance. If needed, look for advisory board members with experience in managing a trading business.  

Financial Plan

Your financial plan should include your 5-year financial statement broken out both monthly or quarterly for the first year and then annually. Your financial statements include your income statement, balance sheet, and cash flow statements.  

Income Statement

An income statement is more commonly called a Profit and Loss statement or P&L. It shows your revenue and then subtracts your costs to show whether you turned a profit or not.

In developing your income statement, you need to devise assumptions. For example, will you charge per item or per pound and will you offer discounts for bulk orders? And will sales grow by 2% or 10% per year? As you can imagine, your choice of assumptions will greatly impact the financial forecasts for your business. As much as possible, conduct research to try to root your assumptions in reality.  

Balance Sheets

Balance sheets show your assets and liabilities. While balance sheets can include much information, try to simplify them to the key items you need to know about. For instance, if you spend $50,000 on building out your trading business, this will not give you immediate profits. Rather it is an asset that will hopefully help you generate profits for years to come. Likewise, if a lender writes you a check for $50,000, you don’t need to pay it back immediately. Rather, that is a liability you will pay back over time.  

Cash Flow Statement

Your cash flow statement will help determine how much money you need to start or grow your business, and ensure you never run out of money. What most entrepreneurs and traders don’t realize is that you can turn a profit but run out of money and go bankrupt.

When creating your Income Statement and Balance Sheets be sure to include several of the key costs needed in starting or growing a trading business:

• Cost of equipment and supplies
• Payroll or salaries paid to staff
• Business insurance
• Other start-up expenses (if you’re a new business) like legal expenses, permits, computer software, and equipment

Attach your full financial projections in the appendix of your plan along with any supporting documents that make your plan more compelling. For example, you might include your facility location lease or a list of your suppliers.  

Writing a business plan for your trading business is a worthwhile endeavor. If you follow the template above, by the time you are done, you will truly be an expert. You will understand the trading industry, your competition, and your customers. You will develop a marketing strategy and will understand what it takes to launch and grow a successful trading business.  

Trading Business Plan Template FAQs

What is the easiest way to complete my trading business plan.

Growthink's Ultimate Business Plan Template allows you to quickly and easily write your trading business plan.

How Do You Start a Trading Business?

Starting a trading business is easy with these 14 steps:

• Choose the Name for Your Trading Business
• Create Your Trading Business Plan (use a trading business plan template or a forex trading plan template)
• Choose the Legal Structure for Your Trading Business
• Secure Startup Funding for Trading Business (If Needed)
• Secure a Location for Your Business
• Register Your Trading Business with the IRS
• Open a Business Bank Account
• Get a Business Credit Card
• Get the Required Business Licenses and Permits
• Get Business Insurance for Your Trading Business
• Buy or Lease the Right Trading Business Equipment
• Develop Your Trading Business Marketing Materials
• Purchase and Setup the Software Needed to Run Your Trading Business
• Open for Business

What is a Trading Business?

There are several types of trading businesses:

• Retail trading business- sells merchandise directly to consumers
• Wholesale trading business- sells merchandise to other businesses
• General merchandise trading business- sells a wide variety of products
• Specialized trading business- sells one specific type of product

Don’t you wish there was a faster, easier way to finish your Trading business plan?

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Since 1999, Growthink has developed business plans for thousands of companies who have gone on to achieve tremendous success.   Click here to see how Growthink’s business plan advisors can give you a winning business plan.

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Trading Business Plan

Starting a trading business can be challenging because you have to build contacts, negotiate, and whatnot. But amidst worrying about all these things, planning is the last thing you want to worry about.

While anyone can start a new business, you need a detailed business plan when it comes to raising funding, applying for loans, and scaling it like a pro!

Need help writing a business plan for your trading business? You’re at the right place. Our trading business plan template will help you get started.

Free Business Plan Template

Download our free business plan template now and pave the way to success. Let’s turn your vision into an actionable strategy!

• Fill in the blanks – Outline
• Financial Tables

How to Write A Trading Business Plan?

Writing a trading business plan is a crucial step toward the success of your business. Here are the key steps to consider when writing a business plan:

1. Executive Summary

An executive summary is the first section planned to offer an overview of the entire business plan. However, it is written after the entire business plan is ready and summarizes each section of your plan.

Here are a few key components to include in your executive summary:

Introduce your Business:

Start your executive summary by briefly introducing your business to your readers.

Market Opportunity:

Mention your product range:.

Highlight the product range of your trading business you offer your clients. The USPs and differentiators you offer are always a plus.

Marketing & Sales Strategies:

Financial highlights:, call to action:.

Ensure your executive summary is clear, concise, easy to understand, and jargon-free.

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2. Business Overview

The business overview section of your business plan offers detailed information about your company. The details you add will depend on how important they are to your business. Yet, business name, location, business history, and future goals are some of the foundational elements you must consider adding to this section:

Business Description:

Describe your business in this section by providing all the basic information:

Describe what kind of trading company you run and the name of it. You may specialize in one of the following trading businesses:

• Retail trading
• Wholesale trading
• Export-import
• Dropshipping
• Describe the legal structure of your trading company, whether it is a sole proprietorship, LLC, partnership, or others.
• Explain where your business is located and why you selected the place.

Mission Statement:

Business history:.

If you’re an established trading business, briefly describe your business history, like—when it was founded, how it evolved over time, etc.

Future Goals

This section should provide a thorough understanding of your business, its history, and its future plans. Keep this section engaging, precise, and to the point.

3. Market Analysis

The market analysis section of your business plan should offer a thorough understanding of the industry with the target market, competitors, and growth opportunities. You should include the following components in this section.

Target market:

Start this section by describing your target market. Define your ideal customer and explain what types of services they prefer. Creating a buyer persona will help you easily define your target market to your readers.

Market size and growth potential:

Describe your market size and growth potential and whether you will target a niche or a much broader market.

Competitive Analysis:

Market trends:.

Analyze emerging trends in the industry, such as technology disruptions, changes in customer behavior or preferences, etc. Explain how your business will cope with all the trends.

Regulatory Environment:

Here are a few tips for writing the market analysis section of your trading business plan:

• Conduct market research, industry reports, and surveys to gather data.
• Provide specific and detailed information whenever possible.
• Illustrate your points with charts and graphs.
• Write your business plan keeping your target audience in mind.

4. Products And Services

The product and services section should describe the specific services and products that will be offered to customers. To write this section should include the following:

Describe your products:

Mention the trading products your business will offer. This may include product categories, product range, product features, product sourcing, etc.

Describe each service:

Mention the trading services your business will offer. This may include:

• Logistics & shipping
• Warehousing & storage
• Distribution & fulfillment

Additional Services

In short, this section of your trading plan must be informative, precise, and client-focused. By providing a clear and compelling description of your offerings, you can help potential investors and readers understand the value of your business.

5. Sales And Marketing Strategies

Writing the sales and marketing strategies section means a list of strategies you will use to attract and retain your clients. Here are some key elements to include in your sales & marketing plan:

Unique Selling Proposition (USP):

Define your business’s USPs depending on the market you serve, the equipment you use, and the unique services you provide. Identifying USPs will help you plan your marketing strategies.

Pricing Strategy:

Marketing strategies:, sales strategies:, customer retention:.

Overall, this section of your trading business plan should focus on customer acquisition and retention.

Have a specific, realistic, and data-driven approach while planning sales and marketing strategies for your trading business, and be prepared to adapt or make strategic changes in your strategies based on feedback and results.

6. Operations Plan

The operations plan section of your business plan should outline the processes and procedures involved in your business operations, such as staffing requirements and operational processes. Here are a few components to add to your operations plan:

Staffing & Training:

Operational process:, equipment & machinery:.

Include the list of equipment and machinery required for trading, such as office equipment, warehouse equipment, transportation vehicles, packaging & testing equipment, etc.

Adding these components to your operations plan will help you lay out your business operations, which will eventually help you manage your business effectively.

7. Management Team

The management team section provides an overview of your trading business’s management team. This section should provide a detailed description of each manager’s experience and qualifications, as well as their responsibilities and roles.

Founders/CEO:

Key managers:.

Introduce your management and key members of your team, and explain their roles and responsibilities.

Organizational structure:

Compensation plan:, advisors/consultants:.

Mentioning advisors or consultants in your business plans adds credibility to your business idea.

This section should describe the key personnel for your trading business, highlighting how you have the perfect team to succeed.

8. Financial Plan

Your financial plan section should provide a summary of your business’s financial projections for the first few years. Here are some key elements to include in your financial plan:

Profit & loss statement:

Cash flow statement:, balance sheet:, break-even point:.

Determine and mention your business’s break-even point—the point at which your business costs and revenue will be equal.

Financing Needs:

Be realistic with your financial projections, and make sure you offer relevant information and evidence to support your estimates.

9. Appendix

The appendix section of your plan should include any additional information supporting your business plan’s main content, such as market research, legal documentation, financial statements, and other relevant information.

• Add a table of contents for the appendix section to help readers easily find specific information or sections.
• In addition to your financial statements, provide additional financial documents like tax returns, a list of assets within the business, credit history, and more. These statements must be the latest and offer financial projections for at least the first three or five years of business operations.
• Provide data derived from market research, including stats about the industry, user demographics, and industry trends.
• Include any legal documents such as permits, licenses, and contracts.
• Include any additional documentation related to your business plan, such as product brochures, marketing materials, operational procedures, etc.

Use clear headings and labels for each section of the appendix so that readers can easily find the necessary information.

Remember, the appendix section of your trading business plan should only include relevant and important information supporting your plan’s main content.

The Quickest Way to turn a Business Idea into a Business Plan

Fill-in-the-blanks and automatic financials make it easy.

This sample trading business plan will provide an idea for writing a successful trading plan, including all the essential components of your business.

After this, if you still need clarification about writing an investment-ready business plan to impress your audience, download our trading business plan pdf .

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Frequently asked questions, why do you need a trading business plan.

A business plan is an essential tool for anyone looking to start or run a successful trading business. It helps to get clarity in your business, secures funding, and identifies potential challenges while starting and growing your business.

Overall, a well-written plan can help you make informed decisions, which can contribute to the long-term success of your trading company.

How to get funding for your trading business?

There are several ways to get funding for your trading business, but self-funding is one of the most efficient and speedy funding options. Other options for funding are:

• Bank loan – You may apply for a loan in government or private banks.
• Small Business Administration (SBA) loan – SBA loans and schemes are available at affordable interest rates, so check the eligibility criteria before applying for it.
• Crowdfunding – The process of supporting a project or business by getting a lot of people to invest in your business, usually online.
• Angel investors – Getting funds from angel investors is one of the most sought startup options.

Apart from all these options, there are small business grants available, check for the same in your location and you can apply for it.

Where to find business plan writers for your trading business?

There are many business plan writers available, but no one knows your business and ideas better than you, so we recommend you write your trading business plan and outline your vision as you have in your mind.

What is the easiest way to write your trading business plan?

A lot of research is necessary for writing a business plan, but you can write your plan most efficiently with the help of any trading business plan example and edit it as per your need. You can also quickly finish your plan in just a few hours or less with the help of our business plan software .

About the Author

Upmetrics Team

Upmetrics is the #1 business planning software that helps entrepreneurs and business owners create investment-ready business plans using AI. We regularly share business planning insights on our blog. Check out the Upmetrics blog for such interesting reads. Read more

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Trading Business Plan

Mar.29, 2024

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Table of Content

According to a report, 13% of day traders maintain consistent profitability over six months, and a mere 1% succeed over five years. This is primarily due to inadequate planning and undercapitalization. A well-crafted trading business plan can help you avoid these pitfalls, and this article will guide you.

In this article, you’ll learn:

• The current trends and growth forecasts in the stock trading industry
• A breakdown of the costs involved in starting a trading company
• The key components of a trading business plan (with a trading business plan example)
• Strategies for securing funding and overcoming the barriers to entry

By the end of this article, you’ll understand what it takes to create a business plan for an investment company , positioning your trading business for long-term success in this lucrative but highly competitive industry.

Pros and Cons of Trading Company

Let’s explore the pros and cons associated with running a trading company before diving into the specifics of a trading site business plan. Understanding them will help you make informed decisions:

• Potential for significant profits.
• Flexibility in terms of time and location.
• Opportunity for continuous learning and skill development.
• High risk due to market volatility.
• Emotional stress and psychological pressure.
• Requirement for constant vigilance and discipline.

Trading Industry Trends

Industry size and growth forecast.

According to a report , the global stock trading and investing applications market size was at around $37.27 billion in 2022 and projects to grow at a CAGR of 18.3% from 2023 to 2030 (Source: Grand View Research). The following factors drive this growth:

• Increasing internet penetration
• Rising disposable income
• Growing awareness of investment opportunities.

(Image Source: Grand View Research)

The Services

As per our private equity firm business plan , a stock trading business offers various services, including:

• Facilitating Trades on behalf of clients
• Algorithmic trading services to automatically execute trades
• Market Insights (research reports, market analysis, and economic forecasts)
• Technical and Fundamental Analysis (price charts, historical data, and company fundamentals)
• Investment Recommendations
• Seminars and Webinars
• Online Courses
• Demo Accounts
• Portfolio Diversification
• Stop-Loss Orders
• Hedging Strategies
• Direct Market Access (DMA)
• Global Market Access
• Trading Platforms
• Mobile Apps
• High-Frequency Trading (HFT)
• Legal and Compliance Services
• Educate clients about Risk Disclosure

How Much Does It Cost to Start a Trading Company

According to Starter Story, you can expect to spend an average of $12,272 for a stock trading business. Some key startup costs include:

How Much Can You Earn from a Trading Business?

Earnings in the trading business can vary significantly and depend heavily on:

• Trading strategy and approach
• Market conditions and volatility
• Risk management techniques
• Capital allocation and leverage

While specific income figures are difficult to predict due to these factors. However, here are some statistics showing the earning potential of a stock trading business:

• According to Investopedia, only around 5% to 20% of day traders consistently make money.
• According to Indeed Salaries, the average base salary for a stock trader in the U.S. is $80,086 per year.
• 72% of day traders ended the year with financial losses, according to FINRA.
• Among proprietary traders, only 16% were profitable, with just 3% earning over $50,000. (Source: Quantified Strategies)

What Barriers to Entry Are There to Start a Trading Company

Barriers to entry into the stock trading business include:

• Regulatory Requirements: Obtaining necessary licenses and registrations from governing bodies like the SEC and FINRA is a complex and time-consuming process.
• Capital Requirements: Trading activities require significant capital to manage risks and leverage opportunities, which can be a substantial challenge for new or small firms.
• Technological Expertise: Developing or acquiring sophisticated trading platforms, algorithms, and data analysis tools is costly and requires specialized expertise.
• Market Knowledge and Experience: Gaining in-depth knowledge and practical experience in the complex and dynamic financial markets takes years of dedicated study.
• Competitive Landscape: Breaking into the highly competitive trading industry dominated by established firms and well-funded proprietary trading desks is challenging for new entrants.

You can overcome these barriers by developing unique strategies, leveraging innovative technologies, and offering competitive and specialized services to differentiate yourself in the market. Do check our financial advisor business plan to learn more.

Creating a Trading Business Plan

A well-researched stock trading business plan is crucial to start a trading business. A general trading company business plan is a comprehensive document that defines your goals, strategies, and the steps needed to achieve them. It helps you stay organized and focused and increases your chances of securing funding if you plan to seek investors or loans.

Steps to Write a Trading Business Plan

You can use a business plan template for a trading company or follow these steps to prepare a business plan for a personal trading business:

Step 1: Define Your Goals and Investment Objectives

Step 2: Conduct Market Research

Step 3: Develop Your Trading Strategy

Step 4: Establish Your Business Structure

Step 5: Develop a Financial Plan

Step 6: Outline Your Operational Procedures

Step 7: Create a Marketing and Growth Strategy

Step 8: Implement Risk Management

Step 9: Create an Exit Strategy

What to Include in Your Trading Business Plan

Executive summary, company overview.

• Market Analysis
• Trading Strategy and Risk Management
• Operations and Technology
• Financial Projections
• Management and Organization
• Appendices (e.g., research, charts, legal documents)

Here’s an online trading business plan sample of ABC Trading:

ABC Trading, a recently established stock trading firm, provides online trading services to individuals and institutional investors. Key highlights of our business include:

• Vision – Becoming a leading online trading platform with a wide range of trading products and services.
• Values – Our core focus is innovation, excellence, integrity, and customer satisfaction.
• Target market – Tech-savvy and risk-tolerant investors looking for alternative ways to invest their money and diversify their portfolios.
• Revenue model – Commissions and fees for each trade, as well as subscription fees for premium features and services.
• Financial goal – Break even in the second year of operation and generate a net profit of $1.2 million in the third year.

ABC Trading is seeking $500,000 seed funding to launch its platform, acquire customers, and expand its team.

Company Name: ABC Trading

Founding Date: January 2024

Location: Delaware, USA

Registration: Limited Liability Company (LLC) in the state of New York

Regulated By: Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA)

Our team comprises seasoned professionals with diverse finance, mathematics, computer science, and engineering backgrounds.

Marketing Plan

Marketing Strategy: We aim to leverage online channels, such as social media, blogs, podcasts, webinars, and email newsletters, to create awareness, generate leads, and convert prospects into customers.

Marketing Objectives:

• Reach 100,000 potential customers in the first year of operation
• Achieve a 10% conversion rate from leads to customers
• Retain 80% of customers in the first year and increase customer lifetime value by 20% in the second year

The customer profile of ABC Trading includes the following characteristics:

• Age: 25-65 years old
• Gender: Male and female
• Income: Above $100,000 per year
• Education: Bachelor’s degree or higher
• Occupation: Professionals, entrepreneurs, executives, or retirees
• Location: US or international
• Trading experience: Intermediate to advanced
• Trading goals: Income generation, capital appreciation, risk diversification, or portfolio optimization
• Trading preferences: Stocks, options, or both
• Trading style: Technical, trend following, or volatility trading
• Trading frequency: Daily, weekly, or monthly
• Trading risk: Low, medium, or high

Marketing Tactics:

• Create and distribute engaging and informative content on social media platforms
• Offer free trials, discounts, referrals, and loyalty programs
• Collect and analyze customer feedback and data to improve and personalize the customer experience
• Partner with influencers, experts, and media outlets in the trading and finance niche

Marketing Budget:

We will allocate $10,000 for our marketing campaign, which we will use for the following purposes:

Operations Plan

ABC Trading’s operations plan ensures the smooth and efficient functioning of the company’s platform and services and compliance with the relevant laws and regulations.

Operation Objectives:

• Maintain a 99% uptime and availability of the company’s platform and services
• Ensure the security and privacy of the company’s and customers’ data and funds
• Provide timely and professional customer support and service

Operation Tactics:

• Use cloud-based servers and services
• Implement encryption, authentication, and backup systems
• Hire and train qualified and experienced customer service representatives and technicians
• Monitor and update the company’s platform and services regularly
• Follow the best practices and standards of the industry and adhere to the applicable laws and regulations

Operation Standards:

Financial Plan

ABC Trading’s financial plan is to provide a realistic and detailed projection of the company’s income, expenses, and cash flow for the next three years, as well as the key financial indicators and assumptions that support the projection.

Financial Objectives:

• Achieve a positive cash flow in the second year of operation.
• Reach a break-even point in the second year of operation.
• Generate a net profit of $1.2 million in the third year of operation.
• Maintain a healthy financial ratio of current assets to current liabilities of at least 2:1.

Financial Assumptions:

• Launch its platform and services in the first quarter of 2024
• Acquire 10,000 customers in the first year, 20,000 customers in the second year, and 30,000 customers in the third year
• Average revenue per customer will be $50 per month, based on the average number and size of trades and the subscription fees
• Average operating expense per customer will be $10 per month, based on the average cost of salaries, rent, utilities, marketing, and legal fees
• Pay a 25% tax rate on its net income
• Reinvest 50% of its net income into the company’s growth and development

Projected Income Statement:

Projected Cash Flow Statement

Projected Balance Sheet

Fund a Trading Company

To successfully establish and operate a trading company, raising funds to finance daily operations and business expansion is crucial. There are different ways with their advantages and disadvantages:

1. Self-funding (Bootstrapping)

Self-funding, also known as bootstrapping, is when the founder or owner of the trading company uses their own personal savings, family business ideas , assets, or income to finance the business. This is the most common and simplest way to fund a trading company, especially in the early stages.

• Complete ownership and control
• Flexibility in decision-making
• Potential for higher long-term returns
• Limited access to capital
• Personal financial risk
• Slower growth potential

2. Debt Financing

Debt financing involves borrowing money from lenders, such as banks, credit unions, or microfinance institutions, to fund the trading company’s operations. The borrowed funds must be repaid with interest over a specified period.

• Retain ownership and control
• Potential tax benefits from interest deductions
• Disciplined approach due to repayment obligations
• Debt burden and interest payments
• Collateral requirements and personal guarantees
• Difficulty in securing financing for startups

3. Angel Investors

Angel investors are wealthy individuals who invest their own money into early-stage or high-potential trading companies in exchange for equity or convertible debt. Angel investors typically provide smaller funding than venture capitalists and offer mentorship, guidance, and access to their network.

• Access to capital and industry expertise
• Potential for additional mentorship and guidance
• Lower risk compared to traditional investors
• Dilution of ownership and control
• Potential for conflicting visions and expectations
• Limited resources compared to larger investors

4. Venture Capital (VC) Funding

Venture capital firms are professional investment firms that provide capital to high-growth startups in exchange for equity ownership. They typically invest large sums of money and are active in the company’s management and strategic direction.

• Access to substantial capital for growth
• Expertise and industry connections from the VC firm
• Validation and credibility for the business
• Significant dilution of ownership and control
• Intense pressure for rapid growth and return on investment

Depending on your business model, goals, and needs, you may also consider other options, such as grants, subsidies, partnerships, etc. Ensure to check for relevant documents, like the hedge fund private placement memorandum . The best way to fund your trading company is the one that suits your situation and preferences.

OGSCapital: Your Strategic Partner for Business Success

At OGSCapital, we specialize in professional business plans that empower startups, established companies, and visionary entrepreneurs. With over 15 years of experience, our seasoned team combines financial acumen, industry insights, and strategic thinking to craft comprehensive plans tailored to your unique vision. Whether you’re seeking funding, launching a new venture, or optimizing your existing business, we’ve got you covered.

If you have any further questions regarding how to write a business plan for your trading business, feel free to contact us. Our team at OGSCapital is here to support you on your entrepreneurial journey. You can also check our hedge fund business plan sample here.

Download Trading Business Plan Template in PDF

Frequently Asked Questions

What does a trading business include?

A trading business involves trading stocks and other financial instruments under a legal business structure. It includes:

• Market analysis
• Trading strategy
• Risk management

How does a trading company work?

A stock trading company facilitates the buying and selling of stocks (shares) on behalf of investors. These companies operate within stock exchanges, executing trades based on specific trading strategies.

OGSCapital’s team has assisted thousands of entrepreneurs with top-rate business plan development, consultancy and analysis. They’ve helped thousands of SME owners secure more than $1.5 billion in funding, and they can do the same for you.

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Analyzing Alpha

Setup a Trading Business: The Complete Guide

By Leo Smigel

Updated on October 13, 2023

Trading as a business involves trading stocks and other financial instruments under a legal business structure, such as a sole proprietor, partnership, or limited liability company (LLC).

Everyone wants to make money, and everyone wants to be free.

You can accomplish both if you’re a successful trader.

And you’re in luck because there’s one thing I know how to do exceptionally well – it’s trading as a business.

You might say, Leo, I don’t need to start a trading business – I’m a new trader. Well then, I’ve got a question: How many successful companies do you think started without a plan? Sure, there are some, but I would bet those with a sound plan faired better over the long run.

And trading is no different. Trading is most successful when it’s done most businesslike.

And for those who are already profitable and ready to go full-time, I’ve got some massive tax-saving tips for you, so stay tuned.

I’ve also sprinkled secrets about becoming a full-time trader that you’ll be hard-pressed to find elsewhere.

I will explain everything you need to know step by step and show you how to become a professional trader running your own successful trading company, whether you’re incorporated.

Before You Can Start Trading

Before creating any business, you need to start with a solid plan and understand where you fit in the market.

But before we jump into the nitty-gritty details of running your trading business, you need to answer five show-stopping questions.

1. What Is Your Why?

Why do you want to be a trader? Many traders start trading because they want to get rich.

Now, it’s possible to become rich trading; however, understand that if you’re not a profitable trader already, the chances of success are slim.

Most studies say that only 5% of traders become profitable. And according to the Small Business Association, this is in stark contrast to starting a business where 33% are still around after year ten.

In other words, if it’s money you’re after, it’s much easier to create an online business than to become a profitable trader.

And no matter how smart you are, trading will slap you around until you’re begging to quit.

You need more than the pursuit of money to keep you in this game.

You need an unwavering passion to play, and you need an advantage.

2. What’s Your Trading Edge?

A trading edge is an observation or approach that creates an advantage over the rest of the market players. Anything that can add a few points to the winning side of the equation builds an edge in your favor.

Most traders lose money in the financial markets because they lack an edge.

I’m also going to say something controversial here:

Risk management isn’t an edge – it’s just good trading – and I can prove it.

Let’s play the coin toss game. If you guess correctly, you get a dollar and lose a dollar if you don’t. You can play this game all day long and cut your losses short, but you’re never going to make a million dollars.

Why? Because you have no edge. The probabilities are not stacked in your favor.

You need an edge to make it full-time, and you need multiple to make it a career.

You need to be the casino – you need to have multiple edges that compound over time. Don’t be a gambler with the odds stacked against you.

So how do you find an edge?

Most edges come from a better understanding of market structure, faster execution speed, or better data and analysis.

For example, a market structure edge may be an exceptional ability to exploit the post-earnings announcement drift (PEAD) anomaly. Another may be the early identification of trends through sophisticated technical or data analysis.

You want to ensure you are on the right side of the stock market as much as you can.

And if you’re struggling to find an edge, I’ve got you covered.

I backtested Scot1and’s slingshot trading strategy at a high level to verify if it has an edge – which it does. If you’re not familiar with Scot1and, he’s a professional trader. He shares his trades publicly on Twitter and has multiple triple-digit years under his belt, with his highest being 305% and last year (2021) being 150%.

Scot1and wanted to find a way to get into solid stocks before the runup and invented the slingshot trading setup. That’s one of his many edges. And this setup can work for you, too, assuming it meshes with your market philosophy and psychological makeup – but more on that later.

Once you have successfully identified and defined your edge, or better yet, edges, it’s time to consider your risk tolerance.

3. What’s Your Risk Tolerance?

Risk tolerance refers to the degree of risk you’re able to take. And while there are multiple ways to define risk, we’ll consider volatility and drawdown for our purpose.

Since your comfort level with uncertainty determines risk tolerance, it can be challenging to be aware of your risk appetite until faced with a potential loss.

You should strive to gain a clear understanding of your risk appetite and your ability to stomach large swings in the value of your portfolio.

When traders trade above their risk tolerance levels, at best, they’ll lose sleep and make suboptimal decisions the next day, and at worst, they’ll sell out at the exact wrong time.

Risk tolerance is all about understanding yourself – a key characteristic you should possess as a flourishing trading business owner.

And let me tell you when you start a trading business, and it becomes your primary source of income, your risk appetite will change a lot – even for algorithmic traders.

Most traders’ greatest struggle in establishing a profitable trading business revolves around trading psychology.

Finding edges in the market isn’t difficult. I just showed you the slingshot strategy, which is a potential edge that you can incorporate into your trading.

What’s hard isn’t knowing what you should do; it’s doing what you should do – it’s trading like a business.

And risk tolerance is just one aspect of trading psychology.

Psychology And Trading

Trading psychology refers to the emotional aspects of an investor or trader’s decision-making process – it’s how emotions affect your trading, and trading affects your emotions.

There are some important considerations to make here.

Most traders fall into thinking they can achieve trading success with little thought of their psychological makeup.

Successfully aligning your trading strategy with your psychology implies you may need to give up on or change some of your values and beliefs.

For instance, do you value your need to be “right”?.

A trader who values being “right” is more likely to refuse to set a stop and take a slight percentage loss in case the trade goes haywire.

Do overnight moves keep you up at night?

Then perhaps day trading is a better style for you.

You need to find a trading style that suits your trading psychology and addresses your strengths and weaknesses.

This doesn’t mean a risk-averse person can’t adopt a swing-trading style. It also doesn’t mean that if you value being right, you’re perpetually wrong when following your stops.

It just means that traders need to understand why they’re embracing a trading approach and have safeguards against their deficiencies – often, you can flip a weakness on its head.

For example, let’s go back to someone struggling to stop out.

The first issue might be that they do not understand what they’re trading and why they’re trading it. If they’re trading specific mean reversion scenarios, they shouldn’t be using stops – position sizing is the key to risk management; however, let’s assume that the trader was a long-only swing trader.

If they’re a breakout trader not following their stops, likely, they don’t have a deep understanding of what a breakout is and how they work.

Now I could spend hours discussing breakouts, but for now, let’s understand two things:

• Roughly 70% of breakouts fail.
• Successful breakouts rarely retrace to the low of the day.

With this market knowledge, this trader that has to be right now understands that her win percentage should be between 25-35% and where to place their stop. Additionally, their understanding aligns with their market understanding allowing her to be correct and less likely to pull the cord on the stop.

I find deep understanding solves most trading psychology challenges – but just because you’ve got your edge and your psychology in order doesn’t mean you can trade like a business just yet.

4. What Are Your Return Assumptions?

Return assumptions refer to the returns a trader or investor expects to make from a particular investment or their trading activities via their trading efforts in the financial markets.

All active traders share one common goal: to utilize their trading capital to make as much money as possible while assuming a certain level of risk.

For that reason, it’s critical to set your expectations right and figure out a rough idea of what kind of return you might achieve before you kick off your trading endeavors.

So, how do you determine a reasonable rate of return?

Whether you’re a business or a trader, the answer is the same.

Look at you and your competition’s average annual returns per each different system or setup, and determine a number you think you can realistically achieve.

Target Compound Annual Growth Rate (CAGR)

This average annual return is the target compound annual growth rate or CAGR. It’s the average return or profit you make divided by your capital.

To keep the math easy, if you make $10,000 on a $100,000 account, your annual return is 10%.

You need to calculate an appropriate CAGR accurately as it flows through to all of your other business calculations, like how much money your trading business needs to generate each year to cover its expenses.

Without history to back it up, investors shouldn’t set their target CAGR above 15%, and traders shouldn’t set their CAGR above 40%.

And yes, good traders have the potential to compound their capital faster than investors due to the structural advantages of having less money to move.

Here are the top ten filers by 10-year annualized performance to give you context.

Now, I know for some of you, these CAGR numbers are tiny, but exceptional returns are the exception, not the rule.

Minimum Absolute Return

Understanding what you can likely achieve makes it time to figure out precisely what you need to succeed.

The absolute minimum return refers to the minimum return that a trader sets over a predetermined time frame.

This return needs to cover your business expenses, which I’ll cover shortly, and the owner’s draw. The draw is the salary you need for yourself and your dependent’s living expenses.

The minimum absolute return is typically your breakeven level. It’s not the target.

Target Absolute Return

The target is your target absolute return. This is the profit you want your trading business to create over the period, typically a year.

You calculate your target absolute profit target by multiplying your target CAGR by starting capital and subtracting fees, which we’ll cover shortly.

I would advise against creating a profit target and working backward since you may need to inflate your CAGR artificially.

The last thing you want to do is overestimate your trading income and underestimate your trading loss.

Maximum Drawdown

Maximum drawdown refers to your maximum downside risk over a period. It’s the maximum observed loss from a peak to a trough.

For instance, if your portfolio value is $100,000 and you lose $30,000, your drawdown would be ($30,000 – $100,000) / $100,000 = 30% or $30,000 in dollar terms.

It’s important to note that maximum drawdown only measures the extent of the most considerable loss, excluding the frequency of significant losses.

Maximum drawdown determines how much capital you’ll need to start your trading business, assuming you’ve included multiple market cycles in your analysis.

Capital Required

Armed with an understanding of your absolute minimum return and maximum drawdown, we can finally determine how much capital you’ll need to start your trading business.

Capital required refers to the amount of money a trader needs to carry out trading activities within the financial markets.

Consider your capital as the raw material that powers your trading activity in the stock market or any business.

So let’s go through the math.

If you need to generate $50,000 per year and expect your minimum CAGR to be 10%, you would need $50,000 / 10% = $500,000 without a drawdown.

Keep in mind if your CAGR return is that low, it’s likely you don’t possess enough of an edge, but I kept the numbers simple for explanation purposes!

But that’s not all. If your maximum drawdown is 20% or $200,000, you’ll also need to add that to your initial capital.

And with all businesses, you’ll need to put in a considerable amount of time.

5. Time Commitment

Time commitment refers to the number of hours per week applied to your new trading business.

It’s essential to treat and act “businesslike” at all times.

Only by approaching each trading day with full intent and purpose can you aspire to succeed.

This extends beyond just executing your trading strategies.

It also includes learning, studying, researching new strategies, and improving your mindset as a trader.

Can you fit it all into your schedule? Do you have enough time to make it work?

These are critical questions to ask yourself before starting your trading startup.

Let’s think about this a little more.

Understanding A Trading Business

Although different from the traditional brick-and-mortar business, a trading business’s anatomy can be broken down similarly.

Think of your trading strategies as your new products and services.

Through these strategies, you’ll be generating your trading income.

And just like how traditional businesses need to constantly improve their products and services based on customer and market feedback, you’ll be doing the same, which leads me to my next point…

Trading Losses Are Expenses

Trading losses are going to be inevitable. You want to take advantage of this market feedback to improve your product. Be sure to analyze each loss and learn from them. They will be your best teacher.

But at the same time, you simply want to treat your losses as a cost of doing business.

Think of the casino business and a game of roulette.

Of course, the casino makes money when the player loses.

But does the player always lose?

So, if we have a player who is always betting on the color red, they have an almost 50-50 chance of winning each time.

There will be times when the player hits lots of reds in the short-run, and the casino loses money.

However, the house always wins.

In the long run, given that the roulette contains a neutrally colored zero, the casino has the edge (remember, we spoke about the edge earlier).

Act like a casino; if you have an edge in the financial markets, you will win long-term.

Short-term losses are simply the cost of conducting business.

Capital Preservation

But continued losses should signal to the management team that it’s time to rethink the plans.

Intelligent management knows preserving your capital to live another day is more important than making more money in the short term.

New traders often have this backward.

The truth is that the only aspect of the trading process you have significant control over is how much money you will lose in a trade.

It’s critical to size your bets correctly.

And speaking of plans, let’s go over what your trading business plan should include.

Your Trading Business Plan

A trading business plan, similar to a typical business plan, is a document that details everything that you need to know to run your trading business. It includes your objectives, how you intend to make money, your edge, what you will trade and why, and how you will grow your business.

It’s time to address the actual birth of your business as a new independent trader.

What Is Your Company’s Mission Statement?

A company’s mission statement defines its culture, values, ethics, fundamental goals, and agenda. The statement outlines what the company does, how it does it, and why. Prospective investors may also refer to the mission statement to see if the company’s values align with theirs.

A well-crafted mission statement articulates the purpose of your business.

It helps to serve as a framework for your business. Outlining what your business stands for, along with your objectives and values.

What is your mission statement? Why are you doing this? Is it just for the money? What’s your driving purpose for embarking on a trading career?

It’s critical to understand the why because it empowers the how.

What Is Your Company’s Philosophy?

A company philosophy refers to “the way we do things around here.” Conventionally, it relates to the fundamental beliefs of the people and the organization.

Your company’s philosophy boils down to your market beliefs.

Do you believe that it is fundamentals or emotions that drive the markets?

Or is it the Fed?

Your trading edges come from a deep understanding of how you view the market. And you need this deep understanding to stick to your strategies during a drawdown.

The last thing you want to do is have a shaky market philosophy and jump ship at the wrong time.

So what is your market philosophy? These will guide your principles.

What Are Your Company’s Principles?

Company principles refer to the principles that a company abides by throughout its day. These could be building a great workplace culture, conservative cash flow use, or taking significant, calculated risks.

What principles does your company abide by throughout your trading day?

These should stem from your philosophy.

For instance, if you believe that the Fed moves the market, are you selling your positions if the Fed is not printing money?

If you’re a trend follower, do you implement Paul Tudor Jones’ rule of refusing to purchase any stock below its 200-day moving average?

Having the various principles aligned with your market philosophy and mission will help you maintain the necessary discipline with your trading.

It will also help you understand what assets to trade.

Your Trading Universe

This is the range of financial instruments that a trader plans to trade across the investable universe, including all tradable assets. In reality, most investors do not invest so broadly and have a narrower universe that could be constrained to event-driven biotech stocks.

This is your total addressable market, and your edge governs it.

Assuming the above, if biotech is in a long-term downtrend, do your edges still allow you to make a profit? If not, you may need to grow your edges and the total addressable trading universe.

What Are Your Company Rules?

Company rules refer to the established rules, in writing, made by the company’s higher level of authority and bound to follow by all employees and stakeholders.

Often these rules revolve around conduct, hours worked, and customer service levels. And larger trading organizations should define these; however, the rules I’m referring to for a trading business help you protect your capital and add discipline to your trading operations to boost profitability — essentially money management rules, which I like to think of in four distinct categories.

1. Portfolio Management Rules

Portfolio management entails building and overseeing a selection of investments or investment strategies that will meet the long-term goals set above.

Most investors take the approach of diversifying their assets, which is a reliable measure.

However, a superior alternative is implementing uncorrelated strategies within the same asset class.

For instance, buyers tend to reduce their leverage during sell-offs, which causes both stocks and bonds to drop, even though these two asset classes are generally uncorrelated.

Therefore, having a mix of long and short stock strategies can help you offset this risk.

What are your portfolio management rules?

An example would never be allocating more than 25% of capital to a single strategy.

2. Risk Management Rules

Risk management is the process of identifying, assessing, and controlling threats to an organization’s capital and earnings. These risks stem from various sources, including financial uncertainties, legal liabilities, technology issues, strategic management errors, accidents, and natural disasters.

Remember that the aspect of trading you have considerable control over is how much you’re willing to lose on any given trade.

So, always go into a trade knowing your pre-defined price targets to take profits and the price points you’re willing to get out for a small loss if the trade goes against you.

The worst thing you can do is hold on to a losing trade that invalidates your thesis, hoping it will eventually become a winner.

An example of a breakout strategy risk management rule would be to set your stop at the low of the day, invalidating the idea if it moves against you, but never more than the average daily range.

3. Position Sizing Rules

Position sizing refers to the size of a position within a particular portfolio or the dollar amount that an investor will trade. Investors utilize position sizing to determine how many security units they can purchase, which helps them control their risk and maximize returns.

How much you will earn or lose from your trades is directly tied to the size of your trading positions.

Your position size will also impact your ability to diversify your trading positions.

If too large a portion of your trading account is tied up in one trading position, you won’t have the necessary capital to open other trades.

We never know which of our positions will be the big winners.

There is no worse feeling than watching the market rally, and you are in 3-4 positions that decide to sit out the rally.

Keep in mind that even with proper position sizing, there is a risk that an active trader’s position loses more than their specified risk if a stock gaps below the stop-loss order.

This is why it’s essential to position size correctly, especially around earnings announcements, which you may want to avoid altogether.

A common position sizing rule is to never risk more than 25% of your account on any single trade.

4. Leverage Trading Rules

Leveraged trading, also known as margin trading, margin finance, or trading on margin, allows you to open a trading position with a broker using a small amount of capital to take a much larger position.

Suppose you commit $10,000 on a 10X leveraged financial instrument. You’ll be trading as if you had put in $100,000.

Thus, any capital gains you make have a tenfold effect, but the same applies to losses, so using leverage implies an element of risk.

If you’re taking on leverage, ensure that your edges are well defined and diversified, and you have a clear leverage rule.

I will never go above 500% leverage, and this scales down as the volatility of the instrument increases.

Leverage is extremely risky in almost all cases. But there is one exception to this:

When trading crypto, using leverage can help mitigate the risk of an exchange hack at the cost of margin interest fees.

SWOT Analysis

With your rules established, it’s time to perform a SWOT analysis.

SWOT stands for Strengths, Weaknesses, Opportunities, and Threats, and so a SWOT analysis is a technique for assessing these four aspects of your business.

SWOT analysis is a simple tool that can help you analyze what your company currently does best and devise a successful strategy for the future.

1. What Are Your Strengths?

Strengths define what you excel at.

Perhaps you have a programming background, and you can create trading algorithms.

Perhaps you’re a decisive person who can make solid, carefully constructed decisions rather quickly.

Perhaps you’re able to stay calm and collected and perform under pressure.

For me, as you’ve probably guessed, it’s the first one that helps mitigate my weakness.

2. What Are Your Weaknesses?

Weaknesses prevent you from operating at your prime.

For instance, you may have difficulty dealing with market sell-offs and tend to get “sucked in” by the emotion of everyone else panicking.

The best way to mitigate this is to have a plan to take advantage of these opportunities.

The second best way is to reread your business plan and stay away from the news and social media on such days.

Plus, keep in mind that these sell-offs are often an opportunity in the market. Smart institutions often accumulate on sell-off days due to their liquidity constraints. If you’re a breakout trader, you should identify what stocks are acting stronger than the market.

As they say, one man’s misfortune is another man’s opportunity.

So, take note of your weaknesses and negative triggers. That way, you’ll be able to easily spot them and make logical decisions rather than emotional, irrational ones that will hurt your profitability.

My weakness?

I pay both my living and business expenses from my trading income. I would feel immense pressure to make money every day and override my trading systems in the early days.

I’m sure you can all guess what happened.

Understand what your weaknesses are, that they may change over time, and figure out how to mitigate them.

3. What Are Your Opportunities?

These refer to favorable external factors to grow your business or competitive advantage.

For instance, can your trading strategies be applied to additional trading instruments or different markets?

Crypto trading is attractive as an algorithmic trader as it trades 24/7 against relatively unsophisticated traders.

4. What Are Your Threats?

In contrast to opportunities, threats refer to factors that potentially harm your business.

Government measures towards reducing fossil fuel use towards energy production in favor of renewable energy sources pose a threat to any non-renewable energy sector business or energy stock in your portfolio.

And these types of risks apply to your trading business.

Changes in capital gains tax laws, crypto regulation, or even black swan events are threats.

Do you have proper hedging strategies in place?

With an understanding of your strengths, weaknesses, opportunities, and threats, it’s time to do some benchmarking.

Performance Measurement

Performance measurement is the process of collecting, analyzing, and reporting information regarding the performance of an individual, group, organization, system, or component.

They say what gets measured gets improved. And like other traditional businesses, trading businesses are no different.

To monitor your trading performance, you require data.

You can collect data manually from your trading platform and record it in a spreadsheet, but I highly recommend that discretionary traders use journal software that records the information.

Although there are hundreds of metrics you could track, you should track the following key performance indicators (KPIs) classified by market and strategy at a bare minimum:

• Profit & Loss
• Total number of trades
• Win percentage
• Average time in trade
• Largest winning trade
• Largest losing trade
• Average winner
• Average loser
• Maximum drawdown
• Profit factor
• Gain-to-Pain Ratio

Feel free to check out my website for definitions and example calculations for these metrics if you have questions.

Operating Costs

As promised earlier, we need to understand your trading business’s fixed and variable costs to determine the absolute minimum return.

Fixed costs are expenses that remain constant for a period of time irrespective of the level of outputs. Variable costs are expenses that change directly and proportionally to business activity level or volume changes.

So, what do these look like for your new trading business?

Fixed Costs

Here are some fixed costs trading businesses have at varying degrees:

• Computer & equipment
• Trading software
• Administration software
• Internet & telephone

You’re most likely already paying for the trading software, and the good news is that most of the home office expenses are relatively inexpensive.

But don’t forget to consider the most significant expense of them all — paying your managing member.

To understand your trading business’s true profitability, you need to track your monthly draw in your accounting software.

Variable Costs

Here are some variable costs involved with your trading business:

• Transaction fees
• Slippage costs
• One-time data costs

Office Location

Another aspect you also want to think about is if and where to set up an office.

As a trader, you can set up an office anywhere you like across the globe — granted, some time zones are more convenient than others.

You can set up your own home office.

You can also buy or rent your own business office.

A big driver of this decision is how well you can balance life and work while at home.

If you’ve got kiddos at home and cannot concentrate, the answer is typically straightforward.

Additionally, scaling to multiple employees is a little easier if you’re an algorithmic trader, as you can more easily separate roles.

These aspects determine whether it makes sense to stay at home or hang up a shingle somewhere outside of your personal space.

Regardless of where your office is, you’ll want to make sure you maximize the tax benefits.

Benefits For Incorporating

There are many benefits of incorporating your business, including asset protection through limited liability, corporate identity creation, perpetual life of the company, transferability of ownership, and an ability to build credit and raise capital and tax savings.

But if trading is your primary source of net income, you should consider incorporating it for tax purposes.

Securities are considered capital assets. The sales of these assets are taxable income considered as capital gains.

This can create massive tax liabilities on your trading operations, so it’s usually ideal for an active trader to incorporate as a company.

Additionally, trading is not considered a business activity by the IRS, so it is not possible to deduct business expenses as they are ineligible for tax deductions in this case.

This is noteworthy since costs such as software, internet access, and data access can be significant for most active traders.

However, you can receive similar tax treatment to other business owners by creating a separate business entity to conduct your trading activities.

You can form a sole proprietorship, partnership, or S-Corp, and file for trader tax status (TTS), which exempts you from the $3,000 capital loss limitation and wash sales adjustments.

A trader can form a single-member LLC to elect S-Corp trader status. The main tax benefits of creating an S-Corp are to arrange tax deductions for health insurance premiums and a retirement plan contribution.

In addition, an S-Corp does not pass through negative self-employment income (SEI), and the employee benefit deductions work tax efficiently.

C-Corps are not ideal for a trader status because the IRS might charge a 20% accumulated earnings tax and the 21% flat tax.

Before incorporating a company, ensure you qualify for it. The business must be eligible for claiming TTS.

While there’s no specific ruleset, we can look at prior court cases to determine eligibility guidelines.

As a trader, you need at least four trades per day. Trade executions on approximately four days per week. More than 15 trades per week, 60 per month, and 720 per year.

Your average holding period must be under 31 days.

Additional factors include having a material trading account size ($25,000 for pattern day trader designation on securities and $15,000 for other instruments).

Spending over four hours per day with the intention to run a business to make a living.

Plus, having trading computers, multiple monitors, and a dedicated home office.

Please keep in mind I’m not a lawyer or an accountant; please consult these professionals so they can understand your specific situation and tax law.

The Bottom Line

We’ve covered much of what you need to know for setting up your trading as a business.

It requires several moving parts, from determining your why, identifying an edge, creating your rules, and even getting into the nitty-gritty of incorporating a legal entity.

The exact, crystal clear method you specifically choose to become a successful trading business owner will not be drawn on a map for you.

Just kidding, there is a map.

It’s called Analyzing Alpha.

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Trading Plan Template & Examples: Step-by-Step Guide to Creating a Solid Trading Plan

Bonus Material:

Trading plans are an important part of any trader’s toolkit. The problem is, most traders don’t actively lay out a plan before they begin trading.

The result? They lose money and wonder why . Furthermore, many traders don’t know how to create a trading plan , or what to include.

Successful traders understand that trading plans are crucial to profiting consistently. In this article, I’ll walk you through creating your own plan, step-by-step, plus you can get a head start by using my free trading plan template, download below :

What is a trading plan?

A trading plan is an integral part of a trader’s strategy, outlining how trades are executed. It establishes rules for buying and selling securities, position sizing, risk management, and tradable securities. By following this plan, traders maintain discipline, consistency, and leverage proven strategies.

Why you should create a trading plan

Ask a new trader what they intend to do before the trading day and then ask them what they did at the end of the day. They almost certainly didn’t follow their plan. 

Trading plans are there for us to follow. Trading plans mean we take trades that are consistent with our rules and risk, and it means we remove a lot of emotion and discretion . This is important because humans are not rational agents and outsourcing this work means we can achieve a better P&L and make more money. 

A trading plan should resemble a business plan. A trader’s capital is their business and so we need to include everything that might be useful, but it should always cover the below.

What to include in your trading plan

• The time required to spend on your trading

Your trading goals and targets

• Your risk tolerance and risk management rules

Available capital for trading

Specific markets you wish to trade, the trading strategies you’ll use, your motivation for trading.

Read more information on what to include in your trading plan (with examples) below, and download your free template here:

The time required for trading

We need to define the time we need in order to trade successfully. For example, if you’re in full-time employment, then it’s unrealistic to spend six hours a day trading the market.

For example: Here is a part of my trading plan…

“To trade the UK stock market on a full-time basis I realistically need to spend at least 8-10 hours per day in order to take advantage of intraday opportunities and manage open positions in real time”.

It’s important to set realistic targets in trading. Once you have a target, you can reverse engineer how to achieve it.

For example: A target of increasing a trading account by 20% is an achievable target. To do that, we need to look at our trading capital and work out which trading strategies we’ll use.

Using breakouts to trend follow is a strategy I have had much success with, and I explain how I do this in my guide to breakouts.

There are several trading styles:

• Swing trading: This is a common strategy that attempts to capture moves over several days or weeks. Swing traders look for shorter term trends and then move onto the next trade.
• Momentum trading: This is a trend-following strategy based on upward movement and momentum. It can be a successful strategy over months and years as the stock continues to move higher. This is often coupled with increasing fundamental strength and accelerating earnings.
• Scalping or intraday trading (also known as ‘day trading’): Intraday strategies refer to trades placed and closed within the same trading session. 

Your risk tolerance and risk management rules 

Risk management is the most important part of trading. Position sizing is the first and last line of defence in our trading accounts.

If you take position sizes with 20% of your account, then that means you are risking 100% of that position every time it is risked in the market. Even if the chances are 99%, then eventually that 1 in 100 chance of the stock going to 0p and losing 100% of the position will happen.

Whilst a 20% drawdown on the trading account isn’t fatal, the law of compounding means that we will now need to gain 25% of our account just to get back to where we started. 

Never underestimate the numbers here – a 33% drawdown requires a near 50% gain just to get back to where we started. 

It’s important to put in place risk management rules that will protect the account and prevent us from taking on too much risk.

Only you will know how much risk you’re willing to take, but if you put yourself in a position where you could do yourself material damage, then eventually that outcome will be presented.

If taking a loss hurts, then it means you are trading too large. Most traders blow their accounts due to overexposure. I’ve never heard of a single trader who blew their account due to continuously taking small losses. Position sizing and risk management is covered in detail in my trading handbook.

Download the free ebook now

Enter your email to receive my free UK stock trading handbook, packed with professional techniques to manage risk and consistently profit on AIM stocks.

Traders should always be clear about what money should be used for trading and what money should stay in their bank accounts. 

Far too many traders have drawdowns in their trading accounts and decide to top up their account with a bank transfer.

Unfortunately, they end up putting far too much money into their account and do not keep track of their losses.

You should never trade with money you can’t afford to lose. I’ve had emails from people asking me what to do because they’ve lost the deposit for their house and they haven’t told their partner. Sadly, there is little that can be done at that point because the money is already lost.

In your trading plan you should be clear about how much is going into your trading account and how much you will top this up each month if that is going to be your strategy to grow your account further. 

However, the best way of growing your trading account is by making money trading successfully in the market. Once you can consistently do this, then it makes sense to increase your funds and scale up. 

A trading plan should also include the specific markets you wish to trade. Do you plan on trading UK stocks, US stocks, foreign exchange (forex), or cryptocurrencies? Once you’ve picked a market, you still need to drill deeper. 

For example: If you pick UK stocks will you trade all of these, or just AIM, or just the Main Market? Will you trade only small cap stocks? Will you trade both SETS and the SETSqx platforms ? 

In my case, I trade all UK stocks, and don’t discriminate between any of them. However, my focus is on smaller stocks under £500 million market cap. 

Your trading strategies are the ways you are going to make money. This part of the trading plan is important because by defining your strategies it will be clear to follow.

For example: I want to trade small-cap stocks that have momentum behind them, and I will find this momentum through technical breakouts and positive RNS announcements.

I will trade gaps and also place orders into the auctions in order to get better fills. I will use various brokers for different types of execution. I will take secondary raises that have news catalysts that can potentially drive the shares higher.

What is your why? What are your goals, and what is your motivation? Trading is hard and there are ups and downs – it’s easy to motivate yourself when the going is good and you’re making lots of money. But it can be harder when you’re suffered several losses in a row, and you keep seeing your account grind lower or flat for weeks on end. 

Writing down your why will make it easier to stay focused and commit to the long-term process and improvement.

For example:

• I want to trade because I enjoy the challenge and I also want to be my own boss.
• I want the freedom that comes with the lifestyle of a full time trader and I want to be around my wife and future children as they grow up.
• I want to offer my family a better life, and by continuing to work on my skillset is putting me closing towards my goals.

Good trading plan example

How do you write a trading plan?

• Know your trading playbook
• Manage your risk 
• Have a realistic profit target

1. Know your trading playbook

You should have a playbook of trades that you know how to execute in the market. A playbook is a list of trades, each with step-by-step instructions on how to trade the pattern. 

If you don’t know what you should trade in your trading plan then building a playbook of trades is a good place to start. 

2. Manage your risk

Risk management is a crucial skill for any trader. I’ve written an in-depth article on trading risk management for further information.

The reason risk management is so important is that without it we would blow up our accounts. Nobody would think about driving a car with no brakes because it would obviously crash – risk management is the brakes and safety system for our trading accounts.

Everyone has different risk profiles. Some are happy to take on high amounts of risk accepting that they may take hefty losses in order for the possibility of excess return. 

Full-time traders like myself tend to be more cautious knowing that if they lose too much capital, they may have to go back to work. 

You should include in your trading plan how much you’re prepared to risk on particular trades in your playbook and how much in your account overall.

3. Have a realistic profit target

Having an idea of a profit target will mean that you don’t end up falling into the trap of never selling. Far too many traders watch a stock rise, see it pullback, then immediately regret not nailing down profit into strength.

By setting out clear take profit targets this avoids indecisiveness and will ensure you execute ruthlessly. 

Bonus tip: Trade the stocks in play

Trading is about being in stocks that are moving. Volatility is the lifeblood of a trader, and a dead stock means dead money. 

The stocks ‘in play’ are the stocks that have moved or are moving in recent sessions, and the stocks we should be immediately keeping tabs on. Stocks can cycle in and out being in play, and so we need to keep track of those that offer the greatest volatility to trade.  

Download my free one-page trading plan template

My opening plan trading template has everything you need to begin the trading day. It forces you to check and review your open positions, so you’re always knowing what to do. 

It also suggests to list the current stocks in play, and how you can trade them, and in what size. Additionally, it asks “What can happen?” so a trader using this template will never be caught out.

By thinking ahead about potential scenarios and how to trade them, this gives the trader an advantage over others who do not put the work in. Traders who punt around their money without a clue or a plan are commonly referred to as “liquidity”.

To download the free template, click the button below and follow the instructions.

About The Author

Michael taylor.

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Starting a Trading Business

• Kunal Desai
• October 27, 2015

Learning to trade stocks is no different than learning any other profession.  You must develop the same level of skill and expertise as a doctor or lawyer, and apply a high degree of commitment and attention to detail for every aspect of the job. Starting a trading business is a similar process to launching any business.

If you want to trade on your own, with your own money, then you need to look at your trading business like any other business. So many traders come in looking at trading as a hobby or a side project, rather than looking at it as if they are the CEO of their own business.

Side projects & hobbies cost you money; the sole goal of trading as a business is TO MAKE MONEY!  So many of the unsuccessful traders I have met over the years have treated their trading like a hobby.

It’s fun for them and gives them a rush of excitement so they keep doing it, but that’s not what leads to consistent profits. Here’s what you need to do to start your trading business.

1. Get Educated .

Just like in any other profession, you have to understand every piece of the job down to the microscopic details. Think about everything a doctor learns and goes through before their first surgery. Just because you watched a few videos and read some books doesn’t make you a trader.

Having a specific method that you know from A to Z and have practiced over and over is necessary before a dollar is ever risked. That’s why in our trading courses where I teach my students every single thing I know about trading, we put our students on trading simulators where they go out and practice what they learned. Our students only go live and trade with real money once they have shown that they can go out and make money every single day.

2.   Build a Trading Business Plan .

Would you go into a bank and ask for a loan to start a restaurant with no business plan? Probably not!  Your trading needs to be the same way. Before they start the simulator, my Bootcamp students all complete a business plan. I want them to really take what they learned in Bootcamp and start to think about how it applies to them.

What style of trading will you do? Day or swing?

What is your system for risk management?

What tools/software will you utilize?

What setups will you focus on?

Putting together a comprehensive plan will give you areas to focus on when you’re trading on the simulator, as simulating without focus is not real practice. When you practice, it needs to be deliberate and mimic real life conditions.

3. Test it Out!

After your have learned and focused your education on a specific business plan, you need to go test it all out.  Either hop on a real time trading simulator like TC2000, ToS, etc., or put a small amount of capital to work! As you know, what looks good on paper often doesn’t make sense in real life conditions, so take meticulous notes on what needs to change in your business plan as you are simulating your strategy.

It will answer some questions for you: does your strategy mix well with your work schedule? Does it make money? Does it suit your personality, etc.  What it will also do– this is important– is keep a log of your trades to give you an idea of your tendencies. What are your strengths and weaknesses? What are your best setups?

To be a consistently profitable trader, you will need a toolbox of go-to setups that are your own and that you can use every single day. Identifying what you’re good at and then practicing it over and over will help you build expertise in these setups.  You need thousands of repetitions to really start to see all the angles as a trader and to build that expertise  that starts here!

4. Structure your Trading Business .

Tax status . Will you trade in an LLC, INC? Will you pursue the trader tax status through the IRS?  It is best to talk to an accountant about these things.  This is a very small part of trading as you only pay taxes if you win! Making money should be your major focus, as the rest is easy if you can do that!

Brokers.  Your broker will change depending on your style. If you’re day trading vs swing trading , the type of commission structure you need will vary. As a day trader, if you pay a flat rate like Ameritrade or Etrade charge, it’s nearly an impossibility to make money unless your account is 500k or more.

Day trading requires often scaling in and out of trades, so a flat fee of $9.99 will cost you hundreds of dollars a day in fees. This makes the cost of doing business so high that the probabilities of covering your fees as a new trader are small.  Some brokers like Interactive Brokers charge per share vs per trade.

That means you just pay for the shares you trade, not a flat fee. 100 shares is 27 cents.  200 shares 54 cents etc.  You can take hundreds of trades, but you still just pay for the shares you trade!  For a swing trader, this means much less as you may only make 5-10 trades a week, so the fees make less of an impact. My swing trades and IRA’s are through Ameritrade  .

Tools.  Often traders need a supplement to the tools their brokers offer. Additional charting or scanning capabilities are needed in some cases. Also, once you have the Go-to setups that you are going to be trading, being able to find them is key! Developing scans to find and alert yourself to opportunities is very important!

I use Trade-Ideas and  TC2000  for my scanning and charting.  Now when I’m trading intraday, I do very little scanning as the homework I do at night gives me more than enough ideas, my goal is to now just execute my plan vs sit there sifting through data during the day, which just throws my focus off.

5.   GO TRADE!

All it will take is everything you got! Your passion and energy for this will help determine your success.  Trading is a lifelong pursuit, so focus on the process each day and learn how to eliminate mistakes and accentuate your strengths. This means keeping a journal of your trades, but also your emotions, so you can see where the screw ups happen and pinpoint them.

PROCESS PROCESS PROCESS . Don’t focus on results or dollars – if you do, it will end you. Think about all the things you need to do leading up to that! It’s the little things that lead to a great day! And keep hammering at it! Reducing and finding ways to minimize slumps are key, as 1 slump can end you.  Remember, your number 1 job is to manage risk at all times. You’re a professional risk manager.

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Disaster Avoidance 101

Building the perfect master plan, 1. goal definition, 2. trading style selection, 3. strategy development, 4. realistic expectation setting, 5. comprehensive market analysis, 6. risk management rule development, 7. trade management plan, 8. trading discipline maintenance.

• 9. Keep Excellent Records

10. Continuous Education

Why should traders develop a plan, how to determine risk tolerance when trading, how to analyze trading performance, what benchmarks can be used for trading, what are the best timeframes to use for trading, the bottom line.

• Trading Skills
• Trading Basic Education

10 Steps to Building a Winning Trading Plan

There is an old expression in business that, if you fail to plan, you plan to fail. It may sound glib, but people that are serious about being successful, including traders, should follow those steps as if they are written in stone. Ask any trader who makes money on a consistent basis and they will probably tell you that you have two choices: 1) methodically follow a written plan or 2) fail.

If you already have a written trading or investment plan, congratulations, you are in the minority. It takes time, effort, and research to develop an approach or methodology that works in financial markets. While there are never any guarantees of success, you have eliminated one major roadblock by creating a detailed trading plan .

Key Takeaways

• Having a plan is essential for achieving trading success.
• A trading plan should be written in "stone", but is subject to reevaluation and can be adjusted along with changing market conditions.
• A solid trading plan considers the trader's personal style and goals.
• Knowing when to exit a trade is just as important as knowing when to enter the position.
• Stop-loss prices and profit targets should be added to the trading plan to identify specific exit points for each trade.

If your plan uses flawed techniques or lacks preparation, your success won't come immediately, but at least you are in a position to study and modify your course. By documenting the process, you learn what works and how to avoid the costly mistakes that newbie traders sometimes face. Whether or not you have a plan now, here are some ideas to help with the process.

Trading is a business, so you have to treat it as such if you want to succeed. Reading a few books, visiting webinars, buying a charting program, opening a brokerage account , and starting to trade with real money is not a business plan —it can be a recipe for disaster.

A plan should be written—with clear signals that are not subject to change—while you are trading, but subject to reevaluation when the markets are closed . The plan can change with market conditions and might see adjustments as the trader's skill level improves. Each trader should write their own plan, taking into account personal trading styles and goals. Using someone else's plan does not reflect your trading characteristics.

No two trading plans are the same because no two traders are exactly alike. Each approach will reflect important factors like trading style as well as risk tolerance . What are the other essential components of a solid trading plan ? Here are 10 that every plan should include:

Firstly, if you are new to trading, you should determine financial objectives, risk tolerance , and time horizon. These items need to be clearly articulated to ensure that your trading activities can be achieved.

A trading style needs to be identified. This style should reflect your personality, culture and preferences. The plan can include day trading , swing trading , position trading or long-term investing . The chosen style should align with one's goals and time availability.

A detailed strategy needs to be created. This strategy outlines an approach to the markets. Also a criteria for trade selection needs to be defined. This can include technical indicators , fundamental analysis or a combination of both. Finally when building the strategy, entry and exit tactics, risk management techniques, and position sizing rules need to be specified.

Trading is not a guaranteed path to wealth and involves inherent risks. Realistic expectations for returns need to be set and the potential for losses needs to be recognized. You should avoid the trap of chasing quick profits or risking too much capital on a single position or trade.

You need to conduct thorough market analysis to identify potential trade opportunities. If they are part of your plan, analyze charts, market trends should be studied, news and economic indicators have to be monitored. Take a step back and consider the overall market condition.

In order to protect capital, risk management strategies should be implemented. Allocate a percentage of your portfolio for each trade and don't go above the amount you have determined is right for your account. This amount should be equivalent to the amount that you are willing to lose per trade. Make use of stop loss-orders to limit potential losses and establish clear take profit targets to secure gains.

Determine how you will manage open positions . You should determine when to adjust stop-loss orders, take partial profits (possibly through the use of trailing stops ), or exit the trade entirely.

Once you have written your trading plan down, stick with it, Avoid situations where you abandon your trading plan impulsively because the market is doing something that elicits an emotional response from you like fear or greed. Train yourself to embrace discipline and consistency when executing and exiting trades.

9. Monitoring and Trade Evaluation

A detailed record of trading activity, including entry and exit points, reasons for taking the trade, and the outcomes are essential. A frequent review and evaluation of trades is necessary to becoming a good trader. The evaluation and review of your past trades will allow you to identify patterns, strengths, and areas for improvement.

The percentage of day traders that quit within two years, according to a 2017 paper titled "Do Day Traders Rationally Learn About Their Abilities" by Barber, Lee, Liu, Odean, and Zhang.

Stay updated on market trends, economic news, and new trading techniques. Read books, attend seminars and webinars, follow reputable financial news sources, and interact with experienced traders to enhance your knowledge and skills.

Traders should develop a plan in order to maintain a disciplined and systematic approach to their trades. Also, a well-defined trading plan helps remove subjectivity from trading decisions.

A trading plan incorporates risk management strategies such as setting stop-loss orders and determining position sizes based on risk tolerance. Without a plan, traders may expose themselves to excessive risk or fail to implement appropriate risk management measures.

Some key factors when traders assess risk tolerance are the financial situation of the trader, the investment goals, risk appetite as well as experience and knowledge of the financial markets. A risk tolerance questionnaire or even a meeting with a financial advisor will help determine your risk tolerance.

There are a number of ways to analyze trading performance. A few common methods include calculating the total return of the trades, determining the profit factor as well as using the Sharpe ratio . Other metrics include analyzing the win rate, the average win amount, the average loss amount, the drawdowns and the recovery rate. In this case, the recovery rate is the percentage of the drawdowns that the trades recovered.

Benchmarks serve as reference points or as performance indicators to assess the success and effectiveness of one's trading strategy. Some common benchmarks include: market indices , professional fund managers, mutual funds or even absolute return targets.

The best trading timeframe is dependent on the trader's style, personal preferences, time availability and the specific market or instrument. There are different time frames for different styles of trading, for instance the following all have very different time frames: position trading , swing trading , day trading and scalping .

Successful practice trading does not guarantee that you will find success when you begin trading real money. That's is because trading real money is when emotions come into play. But successful practice trading does give the trader confidence in the system they are using, if the system is generating positive results in a practice environment. Deciding on a system is less important than gaining enough skill to make trades without second-guessing or doubting the decision. Confidence is key.

There is no way to guarantee a trade will make money. The trader's chances are based on their skill and system of winning and losing. There is no such thing as winning without losing. Professional traders know before they enter a trade that the odds are in their favor or they wouldn't be there. By letting their profits ride and cutting losses short, a trader may lose some battles, but they will win the war. Most traders and investors do the opposite, which is why they don't consistently make money.

Traders who win consistently treat trading as a business. While there is no guarantee that you will make money, having a plan is crucial if you want to be consistently successful and survive in the trading game.

Barber et. al. " Do Day Traders Rationally Learn About Their Ability? ," Page 1.

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The Ultimate Trading Plan Template

A proper Trading Plan is essential to your success as a trader.

Anyone thinking of starting a business wouldn’t begin without a plan, if they do, they probably won’t like the end results. Day trading is no different than any other business.

As they say, “If you fail to plan, then you’ve already planned to fail.”

You’re about to learn the same process I’ve used for the past 20 years. It’s also what I currently teach our students.

After completing this post, you should be confident in your ability to write a rock solid trading plan. To speed up the process, I provided a link to our Trading Plan template at the end.

Let’s get into it…

What is a Trading Plan?

A Trading Plan defines a trader’s goals, expectations, routines, risk management, and trading strategies. A successful plan will include the logic underlying the strategies and processes a trader deploys.

Elite traders already know they have won the game before placing a single trade for two reasons.

First, they have a well defined edge that’s repeatable. 

The primary goal of your trade plan is to precisely define your processes and strategies, with the end of goal of creating a repeatable process.

Second, elite traders fully understand there is a random distribution between wins and losses for any given set of variables that define an edge , resulting in flawless execution.

First, you need to focus on developing your process. You will work on developing the mindset of winning trader and the ability to think in probabilities (versus P&L) when you begin backtesting and simulated trading.

A simple google search and you will find endless styles and formats for trade plans.

For me, my plan acts as the CEO of my business. defining the big picture items such as rules, processes, routines, analytics, theories and goals.

A lot of traders include their trading strategies in their trade plan, but I prefer defining them in a separate Playbook. I do this for several reasons…

First, I’ve been trading for over two decades, in that time I’ve developed and traded a lot of different strategies.

I’ve always found it beneficial to have all my strategies broken down individually. This becomes extremely valuable as you get more into strategy development.

A lot of the strategies I’ve built were a result of combining the different tools, theories and processes from other strategies I’d previously traded in my career.

Second, I think a Trade Plan that focuses solely on the macro level picture will help you in your review.

When I began my career I was surrounded by elite traders every day. My mentor and the owner’s of the firm kept me in line and made sure I was following their processes. If I was trading poorly, they held me accountable.

Accountability Partner

If you haven’t already chosen someone as an accountability partner, it should be the first thing you do after reading this post.

Your trade plan will be shared with your Accountability Partner in order to review your progress.

Your playbook will be used in strategy development and shared with your peers for trade review.

Obviously your accountability partner can play both roles if they have a trading background.

However, it’s more important your accountability partner is someone your close to that is committed to helping you achieve goals.

A good accountability partner will call you out and question you when you’re not following your rules, and due to your respect for the individual it should sting a little.

For the remainder of this post we’re going to focus solely on your trade plan.

Once you’ve completed your plan, I have you covered on your playbook as well. (link to Playbook Guide at the end)

Why You Need a Trading Plan

Good trading should be effortless. The preparation is where the hard work comes.

Imagine two runners, on one hand someone completely out of shape trying to run 1 mile in 10 minutes versus a world-class runner. The process looks effortless for the world-class runner, and it is. They put all of the hard work into their preparation, resulting in a process that is effortless.

Your Trade Plan and Playbook are part of your preparation.

The objectivity and clarity that a solid plan provides is essential in a market that requires split second decision making to capitalize on opportunities.

It will empower you to trade objectively, with confidence and less emotional involvement.

Let’s take a look at some categories you will want to include in your plan.

Trading Plan Outline

This outline is a strong base to get you started. You can use this plan for all markets, including Stocks, Forex, Futures, Options, and/or Crypto.

Remember, there’s no formal rules so get creative!

1. Premarket Routine

Developing routines in our lives helps us to stay on track and reach goals. 

By analyzing our current routines and making adjustments, we’re able to form new habits. A skill that is rewarded in this business.

Here’s a great video on the importance of simple routines, especially when starting your day.

Try it, what do you have to lose?

Outline the tasks you will perform prior to trading each day.

Examples: -Read trading plan -Review a personal journal entry twice a week and reflect -Read prior day’s trade journal -Review prior day’s trades -Check economic numbers -Read playbook -Mirror reflection -Pre-market Analysis

2. Visualization/Mantras

Visualization and Mantras are great tools to include in your morning routines.

Examples: -Visualize yourself taking a trade and going through all the steps outlined in your Playbook -I accept that I have no idea what the outcome of any individual trade will be -I accept that today could be a negative day -I accept the loss of my next  trade financially -I accept I will get stopped out on trades that reverse and rip in the direction of the setup

3. Hard Rules

You want to get very specific with some macro rules for your trading business. They should be reviewed with your accountability partner on a monthly basis at minimum. I recommend meeting weekly or daily if you’re a new trader or not yet profitable.

Examples: -3 losing trades switch to SIM remainder of session -Take a random trade, switch to SIM remainder of session -Two max loss days back to back, SIM for remainder of week -No trading outside RTH

4. Risk Management

You don’t need to over complicate your risk management. Below is what I recommend to my students.

Example: -1% max per trade -3% max per day -5% max per week -15% max per month -Adjust trade size on Monday mornings

IMPORTANT! You should never trade real money until you have proven your ability to be profitable on a simulated account!

I promise, if you can’t make money on a simulated account, you won’t do it on a live account.

Don’t start trading a live account until you’ve proven you have acquired the necessary skills to make money on SIM.

5. Aftermarket Routine

All traders make mistakes. The question is whether or not you will analyze those mistakes to learn from them?

When the trade day ends, you still have work to do.

You should do some journaling and reflection on your execution for the day.

Keeping a  trade journal of all your trades as well as grading every trade is essential for growth. Make sure to take screenshots of your trades as well so you can go back and review them.

Here’s a few more examples: -Complete Scorecard for ever trade taken that day -Complete journal entry discussing market conditions for the day and reviewing your execution -Input trades into spreadsheet or whatever you’re using for analytics -Meditate -Workout

Trading can be emotionally challenging at times. There’s not many professions where you go to work and perform your best yet at the end of the day you leave with less money than you started.

Keeping mentally fit is imperative in this business. It’s important you incorporate some stress relieving activities, such as meditating or working out, into your aftermarket routine.

6. Weekend Routine

On Sunday evenings I have a routine to prepare myself for the upcoming week.

-Read trade journal entries from the past week -Review trades from the past week -Check sizing -Goals for upcoming week -Meet with Accountability Partner

7. Monthly Routine

On a monthly basis you should perform a thorough analysis on your trading business.

Examine your processes and trading analytics, looking where you can improve.

Examples: -Review trade analytics and make adjustments to strategies -Backup everything -Check risk management and sizing -Write main goals for upcoming month

8. Goals/Achievements

The markets are always changing and presenting new opportunities as well as challenges. Even after 20 years, I still find myself learning new things.

Reflecting on why you started trading in the first place is important. Don’t ever lose sight of your goals.

Keep track of your goals and achievements in your trade plan as you progress as a trader. You will find it encouraging as you start to see your progress.

Examples: -Zero random trades for a week -Average trade score of X for the month -First chop comma ($1,000 net day)

While I think all these categories should be included in your own plan, remember to get creative and include anything you feel could potentially improve your trading.

Maybe include some pictures to motivate you.

Free Trade Plan Template (Download)

I created a template in Google Sheets with the categories and examples covered in this post to get you started on your trade plan.

If you would like the template and some other cool trading tools,  become a JT Insider. It’s free.

I also recommend you check out this guide “How to Become A Day Trader – (Here’s how I did it…)”. I share with you how I overcame my trading failures by developing an Objective Edge.

Final Thoughts

Whenever a student comes to me struggling, I ask them for their trade plan. The struggles typically lead back to a rule or set of rules they have outlined in their Trade Plan that they’re consistently breaking.

It’s an essential tool when reviewing your trading with your accountability partner. Remember to select someone close to you must be completely transparent with them or you’re only cheating yourself.

Don’t make trading more difficult than it already is. Write a solid plan and work on having the discipline to follow it.

Anything not mentioned you like to include in your plan? Leave a comment below!

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Creating a Winning Trading Plan: A Comprehensive Guide (FREE Template)

Author - TradeZella Team

As traders, we all want to be successful and achieve our financial goals. But the reality is that many traders fail to achieve the level of success they desire.

One of the main reasons for this is the lack of a solid trading plan.

A trading plan is essentially a roadmap for your trading journey. It helps you to stay focused, stay disciplined, and make better trading decisions.

Without a plan, you're likely to become easily swayed by your emotions, and you'll be more prone to making rash and unwise decisions.

In this article, we'll go over the importance of a trading plan and how you can create one that works for you.

We'll also discuss the role of discipline and consistency in trading, as these are key factors in your success.

We've also included a FREE downloadable Trading Plan template at the end of this article to help you get started!

The Importance of a Trading Plan

As mentioned earlier, a trading plan is essential to your success as a trader.

It provides you with a systematic approach to finding, executing, and managing trades. It's like a playbook that you can refer to no matter what the market throws at you.

Having a plan in place helps you to trade objectively, with less emotional involvement. It also gives you confidence, knowing that you have a predetermined response to different market scenarios.

But perhaps the most important benefit of a trading plan is that it helps to keep you focused and disciplined.

Trading can be a stressful and emotional pursuit, and it's easy to get caught up in the excitement of it all. A trading plan helps to ground you and keep you on track.

Before we jump into how to create a trading plan, you might want to check out our trading plan template . It’s a spreadsheet trading journal that’ll help take your trading to the next level without having to invest in any trading software.

How to Create a Trading Plan in 5 Steps

Discipline and consistency are essential qualities for any successful trader.

Without these, you'll struggle to stick to your plan and make consistent profits.

To be successful in trading, you need to be able to follow your plan even when things aren't going your way.

This means being disciplined enough to stick to your rules, even when it's tempting to deviate from them.

Consistency is also key.

If you're inconsistent in your approach, you'll find it difficult to build a track record of success.

You need to be consistent in your execution, risk management, and trade review process to ensure that you're continually improving and moving closer to your goals.

So, how do you develop discipline and consistency in your trading?

One way is by creating a pre-market routine. This is a set of activities that you perform every day before you begin trading.

It could be something as simple as making your bed, or as involved as reviewing economic data and key support and resistance levels.

Having a pre-market routine helps to set the tone for your trading day and get you in the right mindset . It also helps to build discipline and consistency, as you're following the same routine every day.

Step 1: Premarket Routine

Creating a pre-market routine is an important step in developing discipline and consistency in your trading.

It helps to set the tone for your trading day and get you in the right mindset to tackle the markets.

But what should this routine consist of? It really depends on your individual needs and preferences.

Some traders like to start their day with physical exercise, while others prefer to spend time reviewing economic data and key support and resistance levels.

Here are a few examples of activities that you might include in your pre-market routine:

Neatly making your bed :

This may seem like a small and insignificant task, but it can actually have a big impact on your mindset. A neatly made bed gives you a sense of accomplishment and sets the tone for a productive day. Plus, it just feels good to start your day off with a clean and organized space.

Brushing your teeth :

This is a no-brainer, but it's still worth mentioning. Taking care of your personal hygiene is important for both your physical and mental well-being. Plus, it's just plain gross to trade with dirty teeth (not to mention, bad for your breath).

Doing a 15-minute stretch and workout :

Physical activity has been shown to improve cognitive function and boost mood. Plus, it's a great way to start your day off on a healthy note. You don't have to do a high-intensity workout – even a quick stretch or some yoga poses can make a big difference.

Preparing a snack for the day :

Trading can be mentally and emotionally draining, so it's important to fuel your body with healthy snacks. This can help to keep your energy levels up and your mind sharp. Some good options might include nuts, fruits, or protein bars.

Showering :

Again, this seems like a basic task, but it's important for both your physical and mental well-being. Taking a shower can help to wake you up, refresh your mind, and boost your mood. Plus, it's just plain nice to start your day feeling clean and refreshed.

Reviewing yesterday's trade journal :

It's important to reflect on your trades and learn from both your successes and your mistakes. By reviewing your trade journal, you can identify patterns and areas for improvement. This will help you to become a better trader over time.

Viewing economic numbers for the day :

Knowing what economic events are coming up can help you to make informed trading decisions. By reviewing the economic calendar, you can get a sense of what's likely to impact the markets and how you should position your trades accordingly.

Reading your trade plan :

This might seem obvious, but it's important to actually read and review your trade plan before you start trading. It will help you to get clear on your goals and your rules for finding and executing trades.

Notating key support and resistance levels :

Knowing where key support and resistance levels are can help you to identify potential entry and exit points for your trades. By noting these levels before you start trading, you can be more prepared to take advantage of opportunities as they arise.

Remember, the key is to find activities that help you to get focused and prepared for the day ahead.

You might want to experiment with different activities to see what works best for you.

Step 2: The Trader's Vow

Once you've developed your pre-market routine, it's time to take the next step and make a commitment to your trading plan. This is where the "vow" comes in.

The vow is essentially a promise that you make to yourself to follow every rule in your trade plan. It's a way of reinforcing your commitment to your goals and your plan.

Here's an example of a vow that you might make:

Making this vow is a powerful way to reaffirm your commitment to your trading plan and to your success as a trader.

It helps to keep you focused and motivated, even when things get tough.

Remember, trading can be a challenging pursuit, and there will be times when you're tempted to deviate from your plan.

Having a vow in place can help you to stay on track and stay committed to your goals.

It's also important to note that your vow should be personal and meaningful to you.

Don't just copy someone else's vow – take the time to write your own, using your own words and motivations.

This will make it more powerful and meaningful to you.

So, take same time to think about what your vow might be.

Write it down and keep it somewhere visible, like on your computer or on a post-it note on your desk.

This will help to keep you focused and motivated as you work towards your trading goals.

Step 3: Set your Trading Goals

When it comes to trading, it's important to have specific and measurable goals in place. These goals should be aligned with your overall financial and lifestyle goals, and should help to keep you motivated and focused.

Here are a few examples of trading goals that you might want to consider:

Create the lifestyle you want :

For some traders, the goal of trading is to create a lifestyle that allows them to turn work off when they're done and enjoy everyday life. This might involve achieving financial independence, or having the freedom to travel or spend more time with family and friends.

Provide for your family and loved ones :

For other traders, the goal might be to provide for their family and the people they care about. This could involve saving for your children's education, or creating a comfortable retirement for yourself and your spouse.

Enjoy your career and find fulfillment in your work :

For some traders, the goal might be to find fulfillment and enjoyment in their work. Trading can be a rewarding and exciting career, and setting this as a goal can help you to stay motivated and engaged in your work.

Achieve financial independence :

For many traders, the ultimate goal is financial independence – the ability to live off the profits from their trading. This can be a challenging goal to achieve, but it's certainly possible with the right mindset and approach.

It's important to note that these are just a few examples, and your goals will likely be unique to you.

Take some time to think about what your goals are, and how trading can help you to achieve them.

Plan Your Trade - The Importance of Clear and Defined Rules

In addition to having specific goals in place, it's also important to have clear and defined rules for finding and executing trades.

These rules should be based on your trading strategy and should help you to stay disciplined and consistent in your approach.

Here are a few examples of trade rules that you might want to consider:

Only enter trades that meet your criteria :

It's important to have a clear set of criteria that you use to identify potential trades. This might include factors such as trend, price action, volume, and/or technical indicators. By only entering trades that meet your criteria, you can increase your chances of success.

Use stop loss orders :

Stop loss orders are an important risk management tool that help you to limit your potential losses. By setting a stop loss order, you can protect yourself from large losses if the market moves against you.

Trade with a plan :

Before you enter any trade, it's important to have a clear plan in place. This should include your entry and exit points, as well as any risk management measures you will take. By having a plan in place, you can trade with more confidence and reduce the chances of making impulsive decisions.

Only trade with capital you can afford to lose :

Trading carries inherent risk, and it's important to only trade with capital that you can afford to lose. This will help to prevent you from taking on too much risk and potentially jeopardizing your financial stability.

Be willing to cut your losses short :

No one likes to take a loss, but sometimes it's necessary in order to protect your capital. By being willing to cut your losses short, you can prevent small losses from turning into bigger ones.

Let your profits run :

On the other hand, it's also important to let your profits run when they're in your favor. This means not taking profits too early and giving your trades room to grow. By letting your profits run, you can maximize your returns.

Remember, these are just a few examples of trade rules that you might want to consider.

It's important to customize your rules to fit your individual trading strategy and goals.

Step 4: Risk Management

Risk management is an important aspect of trading, and it's essential to have clear and defined risk management measures in place.

These measures should help you to protect your capital and reduce the chances of large losses.

Here are a few examples of risk management measures that you might want to consider:

As mentioned earlier, stop loss orders are an important risk management tool that help you to limit your potential losses. By setting a stop loss order, you can protect yourself from large losses if the market moves against you.

Set position size limits :

It's also important to have limits in place for how much you're willing to risk on any given trade. This can help you to prevent overtrading and protect your capital.

Use diversification :

Diversification is a risk management technique that involves spreading your capital across a variety of different assets. This can help to reduce the impact of any one asset on your overall portfolio.

Have a plan for managing your emotions :

As a trader, it's important to have a plan in place for managing your emotions. This might involve setting aside time to review your trades, or finding a mentor or accountability partner to help you stay on track.

By implementing these risk management measures, you can help to protect your capital and reduce the chances of large losses.

Remember, risk management is an ongoing process, and it's important to continuously review and adjust your measures as needed.

Step 5: Trade Review Process

Continuous improvement is key to success in trading, and an important part of this process is regularly reviewing and analyzing your trades.

By reviewing your trades, you can identify patterns and areas for improvement, and make adjustments to your approach as needed.

Here's an example of a trade review process that you might want to consider:

Set aside time each week to review your trades :

It's important to carve out dedicated time to review your trades. This might be once a week, or once a month, depending on your trading frequency.

Use a trade journal to record your trades :

A trade journal is a valuable tool for tracking and analyzing your trades. It should include details such as the date, instrument, entry and exit points, and any notes on the trade.

Identify patterns and areas for improvement :

As you review your trades, look for patterns and areas for improvement. For example, are you consistently taking too large of a position size? Are you missing key entry points? By identifying these patterns, you can make adjustments to your approach as needed.

Seek feedback from a mentor or accountability partner :

It can be helpful to get feedback from someone else on your trades. This could be a mentor, accountability partner, or even a group of fellow traders. By getting an outside perspective, you can gain valuable insights into your approach and identify areas for improvement.

By regularly reviewing your trades and making adjustments as needed, you can improve your performance over time and become a more successful trader.

Conclusion: The Value of a Solid Trading Plan

In conclusion, a solid trading plan is essential to your success as a trader.

It helps to provide clarity and objectivity in your approach, and can help you to trade with confidence and less emotional involvement.

A good trading plan should include a pre-market routine, a vow to follow your plan, specific goals, clear rules for finding and executing trades, risk management measures, and a trade review process.

By following these guidelines, you can increase your chances of success and improve your performance over time.

If you're interested in taking your trading to the next level, we invite you to sign up for early access to TradeZella, a powerful trade journal platform that helps you to create, backtest, and optimize your trading strategies. With TradeZella, you can take control of your trading and achieve your financial goals.

Sign up for access today and start building the ultimate trading plan for your success.

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9 Best Trading Business Ideas

Back to Business Ideas Categories

Written by: Esther Strauss

Esther is a business strategist with over 20 years of experience as an entrepreneur, executive, educator, and management advisor.

Edited by: David Lepeska

David has been writing and learning about business, finance and globalization for a quarter-century, starting with a small New York consulting firm in the 1990s.

Published on August 12, 2022 Updated on March 6, 2024

Are you a born trader? If so, you’ve come to the right place. Countless businesses involve trade, from import-export to stock trading, from online resale to cryptocurrency and beyond. You could even be a wholesaler or get into dropshipping. 

Just keep in mind that, although you’ll be aiming for profits, you will need to trade fairly if you’re going to build a strong reputation and achieve lasting success. Check out our list of terrific trading business ideas below and step into your entrepreneurial future.

1. Dropshipping

Dropshipping is an increasingly popular business model in which online stores sell products without carrying inventory. Instead, when the shop owner receives an order, she simply contacts the supplier and relays the product order, which is then shipped directly to the customer.

Already, dropshipping apps like Oberlo have begun to gain ground, enabling business owners to offer products from several different suppliers. The market is worth $130 billion and expects 30% annual growth through 2026. That’s lightning-fast expansion, and you could ride this wave by starting your own dropshipping business on Amazon.

The market is growing fast and offers great opportunity for the bold entrepreneur. Yet because a dropshipping business is relatively easy and inexpensive to launch and operate, the competition is getting intense. In order to stand out, your dropshipping business will need to offer either uniquely appealing products or, more likely, a one-of-a-kind customer service experience, from order placement through delivery. 

It’s not easy becoming the next Jeff Bezos, but right now is a great time to give it your best shot.

2. Import-Export

Many budding entrepreneurs think starting an import-export business is too complicated. But that’s not always the case, especially today, with the advantages of technology. To get started, you could focus on a single product or line of products, such as Middle Eastern spices or Chinese vases. Then research several markets, find products in high demand and seek out a reliable supplier to partner with. 

At least in the early days, you should be able to work from home, as your minimal inventory will not require a warehouse. Before you start trading, however, you’ll need to make sure you’ve crossed all the bureaucratic hurdles, such as getting the appropriate licenses and permits and preparing to pay the relevant taxes and tariffs. Finally, you’ll need to create a strong marketing plan and start promoting your goods to potential customers, online and off. With a little hard work and perseverance, you can emerge as the next big international trader !

3. Wholesale

Wholesale is all about the advantages of scale: prices are lower because purchases are in bulk, such as vast amounts of tomatoes, cement mix, or shoes. If you’re good at scaling up your sales, you might consider starting a wholesale business, as the industry expects steady growth in the years ahead. 

Getting started will require a significant investment, because all of that inventory is not going to suddenly appear out of nowhere, and you’ll need a place to keep it. Fortunately, unlike retail, a wholesale business doesn’t have to worry about finding a location with heavy traffic. Instead, the main concern is space. Once you’ve got your goods and a warehouse, you’ll need to obtain all the necessary licenses, then start reaching out to local businesses that might be interested in your goods.

Keep in mind that this is a big and growing industry, which means you’re going to face stiff competition. You’ll likely need to work hard, and smart, to succeed.

4. Retail Store

Are you thinking of starting your own retail business? If so, you’re in good company. The retail industry is a huge part of the economy, and it’s only getting bigger. But starting a retail business isn’t easy. There are a lot of things to think about, from choosing the right location to setting up your payment system. And let’s not forget the most important step: choosing what to sell ! 

A good way to narrow it down is to first do some research — check out what’s hot and what’s not. Keep an eye out for products that sell well and a possible market gap to fill.  Once you know your products, finding a great location for your store will be the next big step, though at least to start you might want to run your business out of your home to cut costs.

After a year or two, assuming your products are well received, you’ll be in a much better position to find a great location and run a successful retail outlet.

5. FBA Business

FBA stands for Fulfilled by Amazon, and it’s a great way to simplify the process of selling products online. If you’re looking to tap opportunities created by the rapidly growing online shopping market, then consider starting your own FBA business. Before the pandemic struck, 73% of Amazon.com sellers in the US utilized third-party FBA services which include storage, packing and shipping. This is expected to rise as the online marketplace giant broadens its target market and its global reach. 

Before you get started, familiarize yourself with FBA policies and requirements for labeling and packaging. You need to know which products require prior approval before these can be sold on Amazon and which products can’t be sold using FBA. You will need to find a storage space, acquire a truck or fleet of trucks, set up a website and social media accounts, and promote your services. You will also need to comply with state and federal laws and regulations governing the logistics sector.

6. Amazon Business

Have you got some great products, but have never sold goods online? One of the best places to start is the world’s largest retailer, Amazon, which gives you immediate access to 300 million global shoppers. Whatever you’re offering, you could become an Amazon seller and offer your goods straight to all those customers and businesses. And for an added fee, Amazon fulfillment can take care of all your shipping, returns and customer service. 

It might seem overwhelming at first, but it really isn’t that difficult to get started with Amazon. You’ll just need to choose a selling plan (individual or professional), determine your strategy (reseller or brand owner), create an Amazon seller account and start adding products to your page. As long as your products are appealing and your marketing is strong, you should start seeing sales in no time.

7. Cryptocurrency Trading

If you’re an entrepreneur, or would like to become one, it’s important to always be on the lookout for the next big thing. Lately, that thing has been cryptocurrency, the digital currencies that use cryptography and the blockchain to secure transactions and create new units. Though it’s taken a few hits lately, the global cryptocurrency market is expected to be worth more than $32 billion by 2028, after years of impressive 58% annual expansion. 

Cryptocurrency may well be the world’s fastest-growing industry, and you can get in on the action by starting your own cryptocurrency business. Assuming you’re not going to create your own cryptocurrency, which requires programming expertise, you’ll need to decide whether you want to start a wallet, which is an application that helps users store and spend cryptocurrencies, or an exchange, which enables cryptocurrency trade. Another option is to become a cryptocurrency investor and broker, which will require considerable expertise regarding the fast-evolving field of cryptocurrency. 

Whichever option you choose, be sure to do your research before committing too much of your, or other people’s, hard-earned funds. If you do find a niche, this is an industry that could deliver massive returns.

8. Stock Trading

If you have experience with securities, you might want to consider getting into the stock trade. The stock market is projected to continue growing in the next several years, with more than 40,000 industry jobs expected to be created annually through 2030. 

The first step in starting a stock trading business is to secure a license and become a member of a stock exchange. You can start small and trade from home. It’s important to make a business plan and come up with ways to differentiate yourself from other agencies in order to attract clients or investors. It’s wise to offer a diversified portfolio, research the market, monitor any business news likely to impact the stock market, and brace for any wild swings that could result in losses.

9. Online Resale

Want to talk about a booming industry? In the coming years, apparel resale is set to grow 11 times faster than the clothing industry, with most of that growth happening online. One reason is that Gen Z’ers and millennials like sustainability, thrifting and throwback trends. Another is that the resale industry sources its goods domestically and as a result is not facing the supply chain issues of major retailers. 

The big question is how you’ll go about reselling your goods. One option is to rely on major online marketplaces like Etsy and eBay. Another is to partner with resale-focused sites like ThredUp. A third is to create your own resale website. The advantage of this option is you’ll be able to express your own sense of style and build your own brand, while the downside is the added time and expense. 

Whichever route you choose, as long as you have reliable access to quality goods for resale and provide strong service, you’re likely to keep that cash register ringing.

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• Dropshipping
• Import-Export
• Retail Store
• FBA Business
• Amazon Business
• Cryptocurrency Trading
• Stock Trading
• Online Resale

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How to Start and Grow a Successful Forex Trading Business

• Post author By Forex Academy
• Post date 26 November, 2023
• No Comments on How to Start and Grow a Successful Forex Trading Business

The foreign exchange market, also known as forex, is one of the most lucrative and dynamic markets in the world. With a daily trading volume of over $6 trillion, it offers countless opportunities for individuals to start and grow a successful forex trading business. However, like any other business venture, it requires careful planning, knowledge,…

Step 1: Educate Yourself

Step 2: Choose a Reliable Broker

Step 3: develop a trading plan, step 4: start with a demo account, step 5: start small and manage risk, step 6: continuously learn and improve, step 7: keep a trading journal, step 8: embrace discipline and patience, step 9: diversify your trading, step 10: set realistic expectations.

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This lesson will incorporate many aspects of trading that you are likely to be familiar with. We assume that you have already been trading and you are looking to make your approach more professional. If you are new to trading, then this lesson is still very beneficial to you, because you can start your education with a clear goal in mind.

This lesson serves as a hub for each aspect of trading, because in order to develop a business like approach, you now need to tie in all the different aspects of trading together.

Your trading business

If you are considering a career in trading, whether that career is full time or part time, you must view this as a business. A bank or a financial institution has hundreds of people working for them. This includes risk managers, analysts, accountants and of course the traders that execute the positions.

All of these people make up the business and they each specialise in their own area. You will be all of these people combined – you are the business.

Trading is like any other business

In order to begin thinking of trading as a business, you need to consider every detail about what can impact your success and what will affect your overall profitability.

You have costs that you need to cover, and in the case of full time trading, there needs to be enough left over for your living expenses. There are also tax implications, computer costs, possible fees for price data and use of trading platforms. Even your electricity bills need to be considered, because they all have an impact on your overall profit.

Most importantly, you need to understand your goals and how you are going to achieve them.

Even if you consider trading as a part time job, you will still need to consider these factors.

What is a trading business plan?

A trading business plan, just like a normal business plan, is a document that details everything that you need to know in order to run your trading business.

It includes your goals and objectives, how you intend to make money, what your edge is, what you will trade and why, and how you will grow your trading business.

It should also include details about the technical and fundamental analysis you will use, money management, psychological ideals and how you will prepare, execute and then evaluate the trades you place.

A trading plan, in essence, holds all of the information, rules and practices you will employ.

Creating a trading plan

Before you set out to create your trading business plan, you need to first of all define your goals.

Define your goals

What are you looking to achieve both personally and financially?

Financial/trading goals

• What are you looking to make in a year?
• How much are you looking to reduce your drawdown by?
• Will you use different strategies to deal with different market conditions?

Personal development

• How will you work towards becoming more disciplined?
• How will you deal with drawdown periods?
• How will you adjust if your financial goals are not being met?

Creating your plan

Now that you have defined your goals, you can create your business plan.

What is your investment?

• How much starting capital do you have?
• What amount of capital are you going to initially invest?
• How much capital do you have to initially cover your total costs? How long will this last for?

You should always only invest what you are comfortable with.

What are you going to trade?

Are you going to diversify into different asset classes or will you focus on one specific market?

Note that it is considered better to look at more than one asset class where possible, in order to maximise opportunity. At the same time you must be careful not to overextend yourself.

Some strategies are optimised for specific asset classes and so you will need to consider what you can and cannot trade.

What are your costs?

• How much will it cost you for each trade in spread and commission?
• Do you have to factor in overnight positions?
• How much do you pay for your trading software?
• How much do you pay for your data feeds?
• How much do you pay in bills for your electricity?
• How much do you pay to rent your office space/desk? Or what is your rent/mortgage?
• Do you have to pay tax? If so how much? Do you have to pay an accountant?

You need to list every single expenditure that you have.

What technical strategy will you use?

This is at the heart of your trading business plan. First of all you will need to write down each aspect of your technical strategy.

• What is your entry?
• What is your stop loss?
• What is your profit target?
• What charting tools will you use to identify, enter and exit trades?
• What charting patterns/candlestick patterns will you use?

You will also need to make sure that the strategy that you are using has been fully tested and that you have recorded your benchmarks in your plan:

• Will you trade more than one strategy?
• Will you trade more than one asset class? Have you tested each asset class?
• What are the benchmarks of your strategy/asset class you are trading with?
• What can you realistically expect in real live trading, based on the results of your testing?

What fundamental factors will you incorporate?

You need to decide if you are going to trade certain news events or not, if so, what fundamental news services (websites, newspapers etc) if any you will use?

Do you need to pay attention to specific earnings reports or bond auctions? Do you need to take into consideration economic reports? Will you simply be aware of certain news releases to stay out of the market?

Money Management

The effectiveness of your money management plan will determine whether you will be able to carry on after a drawdown period or difficult market environments. Money management will essentially keep you in business.

What will your average position size be?

What will you risk per trade and will you risk more on different trade types?

How many trades are you looking to take per day?

How do you intend to trade during winning and losing cycles? For example, will you cut the size of your position if you are losing? Will you increase it when you are winning?

Daily routine

The section on your daily routine should contain the plan you will use on a daily basis before, after and during your trading day to optimise your mental state.

It will include:

• What you will do for your daily preparation/rituals before you trade.
• How often you will take breaks.
• The methods you intend to use for evaluating your trading day.
• How you intend to optimise your end of day ritual to ensure you are in peak condition and organised for the following trading day.

Psychology management

• How will you deal with emotion?
• How will you recognise if you are in an emotional state and should not trade?
• How will you break cycles of losses?

For example, you may decide to take regular breaks during the trading session. It may be that you are going to write a trading journal that encompasses a section on your emotional state during every trade. Either way, planning how you will deal with psychological issues is a great way to finish up your trading plan.

Evolution of your trading business plan

Once you have written your plan, you will need to continuously evaluate and amend it.

This is because the strategy you start with may not be the same strategy you trade with in the future. Your trading business plan is something that should constantly evolve, just as you do as a trader.

You will find that you may change certain aspects of your routine and you need to record this.Although it is not necessary to change things weekly, a monthly review of the plan may be beneficial in both refreshing yourself with your trading system and also for making any changes or additions.

In this lesson you have learned that ...

• ... if you are considering a trading career, you must have a business plan.
• ... banks and financial institutions have hundreds of people working for them. This includes traders, analysts and risk managers – you will have to be all of these.
• ... a trading plan includes all the rules and information you will employ to be a full time trader.
• ... you need to first define your personal and financial goals.
• ... after you have created your goals, you need to put together your business plan.
• ... you need to consider: the cost of trading, which technical strategy/strategies you will use, what fundamental factors you will incorporate and what your money management practices will be.
• ... you will also need to define your daily routine and how you will deal with the psychology of trading.
• ... you must keep in mind that your plan will evolve as you develop as a trader.

quiz: Creating your trading business plan

Daily preparation, quiz: daily preparation, evaluating your trading performance, quiz: evaluating your trading performance, the end of the day trading routine, quiz: the end of the day trading routine.

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Risk warning: Trading in financial instruments carries a high level of risk to your capital with the possibility of losing more than your initial investment. Trading in financial instruments may not be suitable for all investors, and is only intended for people over 18. Please ensure that you are fully aware of the risks involved and, if necessary, seek independent financial advice. The educational content on Tradimo is presented for educational purposes only and does not constitute financial advice.

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Trading Basics

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Day Trading Like a Business – Learn What it Takes

Sep 29, 2018

Written by: Al Hill

Traders who are most successful in day trading are those that can draw similarities between their day trading operation and a traditional business. While day trading may be polar opposites from a brick-and-mortar company, similar business principles will decide who has lasting power.

In this post, we will cover some of the basic questions many new traders have when considering day trading as a career. To be clear these are traders looking to go at this on their own either fully funded or with a prop firm.

Trading Plan

Starting a day trading business requires a few basic elements: trading capital, knowledge, trading equipment, measuring performance and how to pay yourself a salary. Let’s analyze each piece of the puzzle.

1. Trading Capital

Starting a day trading business without trading capital is impossible. SEC regulations require that day traders operating in the United States must have at least $25,000 in their trading account to be able to make quick trades commonly associated with day trading.

While you may get away with exceeding the limit for a few days, your operation will be quickly shut down until enough capital is obtained.

However, keep in mind that starting a day trading business most often requires more than the legal minimum investment.

Consider this: to make $75,000 a year on a $25,000 account, you would have to generate an effective 300% annual rate of return. These sorts of return will require you to take on enormous levels of risk. This level of risk taking is often what leads to traders blowing up their account.

2. Knowledge and a Day Trading Business Plan

Starting a day trading business also requires a firm understanding of the financial markets, as well as a solid business plan – a.k.a your trading plan . It should outline how much you’ll stake on each position, how you’ll cut your losses, how you’ll define winners, and how you’ll evaluate each trade.

The goal of the trading plan is to anticipate every outcome while reducing the risk that your emotions and “gut feelings” will get in the way of making money. Just as successful companies thrive on people, process and product you need to ensure your process for trading is ironclad.

No matter your level of experience, if you begin to trade “freely” you will ultimately fall victim to the market.

3. Trading Equipment

Trading Monitors

Starting a day trading business has a number of front-end costs to consider that should be marked in your day trading business plan. The first expenditure is a trading machine and software.

Most day traders have a minimum of two monitors to watch streaming data, charts, and brokerage software. Other day traders have entire walls of monitors that track every type of imaginable tick and chart type.

Also, you should invest heavily in a reliable internet connection – and a backup connection. An unreliable internet connection will result in losing trades and less control. Remember, you may have at any time hundreds of thousands of dollars in the market, and without an internet connection, you won’t be able to enter and exit your positions. Going cheap here could cost thousands in the long run.

4. Measuring Performance

You will need to measure your performance, first for yourself to keep track of your progress but ultimately as a means to attract investors.

At the end of the day, if you don’t have the numbers, you don’t have a business. Now, the numbers are relative. What I mean by that is if you are looking to attract aggressive investors or make a name for yourself quickly, your returns will need to come fast and in a hurry.

If you are more measured in your expectations,  then time will play into your performance and you can focus on showing a positive return over a 5 or 10-year period.

Measure Performance

I have written extensively on how to measure your performance  which goes really deep on this topic.

While these stats are super important and will help you gauge your performance, the one big metric I focus on like a hawk is my profit/loss for the week.

As you are trading like a business and not a hobby, your goal is to make profits.

I like to break my week down into three parts (1) get ahead, (2) stabilize and grow and (3) protect.

This is how I start each week in terms of my mindset. Now that is, of course, subject to change based on how things are going.

Monday and Tuesday are really about getting ahead. I don’t necessarily take more risks, because I try to always maintain control. However, I might not be as strict about the trades I take and I will let my profits run a little longer.

Wednesday and Thursday are building blocks to add onto the success from earlier in the week. This is also a time for me to make sure I build upon the earlier success in the week and not making any sloppy trades.

Friday is about protecting and not taking on too much risk. This is because you do not want to blow up your entire week based on one bad day.

I recently had a Friday like that where I literally gave back an entire week in 2 hours. Let me be the first to tell you this does not feel good and can really screw up your mentals heading into the weekend.

So for Fridays, if I’m up big for the week, I may limit the number of trades I place or limit the amount of money I use on each setup. This way I dramatically lower the risk of blowing up my week.

5. Stringing Together Winning Weeks

Winning Streak

Now that you are building up to your winning Friday the next thing you want to do is string together a number of winning weeks. This will allow you to continually push your account value up and to the right.

In the beginning, do not concern yourself with how much you are making. The only point of importance is that you are not blowing up your account or demonstrating any of the self-destructive behaviors that hold you back from trading success.

Once you start to put together a winning streak, momentum starts to move in your favor. You will start to take on a winning attitude and this game I believe is 80% mental and 20% strategy and technicals.

6. Winning Months

Now, this is the big metric I track and there is no wiggle room on this one. I have to finish up for the month. Let me restate this – I have to finish up for the month.

I will set a potential profit target but I historically aim too high. So the one big metric I focus on is finishing in the black.

You cannot control how much you will make in the market. There are so many factors that drive your potential profits but the one thing you can control is your own actions and refusing to finish in the red.

7. This Does Not Mean Trying to Force Your Will on the Market

Please do not misinterpret my point to say you should do whatever it takes to make the market provide you with money each month. What I am saying is if you are focusing on your daily outcomes. Then you have a game plan for managing your money for the week. Next, you build up these winning weeks to a full month.

If you follow this approach, the odds of you finishing in the red are slim to none. It’s not about forcing trades or trying to force the market your way (which is impossible).

It’s about doing the right things on a daily basis which ultimately over a twenty to twenty-two day period build up to you turning a positive return.

8. Paying Yourself

Never Take a Dime Out – Grow..Grow..Grow

This is where I feel many people on the web mislead traders in terms of the value of money. You hear about traders taking a small amount of money and growing it into some massive fortune.

While this makes for great commentary on the web, do any of us honestly believe this is a common occurrence?

Also, when do these traders pay themselves? How do they structure their lives in terms of paying bills, saving for retirements and family vacations?

These are all answers you need to account for if you plan on taking up day trading as a business.

Now, your first inclination is going to be to grow your account to some mythical number before taking profits. This, my friend, breeds poor habits over the long haul.

To place real value in the money, you need to take money out and use it in your everyday life. This will not only teach you the value of your hard work but will also allow your family members who sacrifice spending time with you to also see benefits of having to put up with your occasional mood swings.

9. How Much Do You Take Out?

This is going to be completely up to you. The minimum you will need to take out is your monthly commitments.

Once we get beyond this figure, what is another realistic number?

Set a Fixed Number

I like to set a monthly target for myself in terms of payout. Once I hit that number I immediately withdraw the funds from the account. The rest of the month can then be used to increase my account value.

You can also use an approach where you take 50 percent of your profit out. The challenge here is that you will have a tough time growing your account after paying taxes.

Starting a day trading business is rewarding and profitable. Whether you’re looking for flexible hours, a work from home environment, or a career with unlimited profit potential, a day trading business is a great way to start a side business.

I have laid out here the key aspects of what you need to consider before picking up trading as a profession. At the end of the day, you must turn a profit in order to consider yourself in the trading business.

Learn how to build your trading day, week and month by replaying the markets in Tradingsim . I have personally been able to trade months in only 5 days.

This way you can see what it takes and tweak your strategy in order to turn a profit.

Tags: Day Trader Salary

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ESR says it has investor group’s proposal to take it private

HONG KONG - Hong Kong-listed real estate fund manager ESR Group, which halted trading in its shares on May 13, said in an exchange filing that a group of investors has proposed to take the company private.

ESR, which is currently valued at US$5.4 billion (S$7.31 billion) and is backed by US private equity firm Warburg Pincus, said in a statement after the market close that it has received the non-binding, conditional proposal from a consortium of investors made of entities controlled by Starwood Capital Group, Sixth Street Partners and SSW Partners, which could result in ESR’s delisting.

ESR said that under the proposal, which it received on April 25, its shareholders would have a choice between cash consideration or rolling their shares into the go-forward private company, subject to the terms of the final roll-over arrangements.

Earlier on May 13, ESR said in a filing that its trading was halted pending an announcement about inside information.

The company said it has formed an independent board committee to consider the proposal, adding that its consideration was at a “preliminary stage”.

It said Warburg Pincus, which is not part of the consortium, and ESR’s founders are in discussions with the consortium about its proposal, which they welcome and believe would be in the best interest of ESR shareholders.

ESR said it has asked the stock exchange to resume trading on May 14. Its shares closed at HK$10 (S$1.73) on May 10, the highest since March 4, valuing ESR at US$5.4 billion, according to LSEG data. The shares have fallen 7.4 per cent so far in 2024, lagging a 12 per cent increase in the benchmark Hang Seng Index.

Reuters reported the take-private proposal earlier on May 13, with sources saying the discussions were at an early stage, with its terms yet to be finalised.

ESR manages a range of property-focused funds and its own property investments. It went public in Hong Kong in 2019 after pricing its initial public offering at HK$16.80 per share.

Headquartered in Miami, Florida, Starwood Capital has raised over US$75 billion since its inception in 1991 and currently has about US$115 billion of assets under management, its website says. REUTERS

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Two wars and high borrowing costs have trimmed expected growth in countries covered by the European Bank for Reconstruction and Development (EBRD), the bank said in a semi-annual report released on Wednesday.