It should be obvious by now that trading is to me, more than just a way to make money (if you’re new here, check out the About page).
What’s probably less obvious though, is that I don’t consider myself to be just a trader.
You see, I really consider myself to be a capitalist and explorer.
To me, trading was never meant to be an end in itself, but rather as a means to a more meaningful, and fulfilling end.
This is a topic I could talk about for hours, but today I’m just going to focus on retail trading as a business model, and why I choose to focus my time and energy on it.
In my view, this is the best business in the world to be involved in.
Let’s see why.
A big reason for choosing trading as a money-making endeavor is the leverage that’s readily available.
If you tried to borrow $100,000 from your favorite bank to start a business with no track record, you’d be shown to the door faster than you can say “pretty please?”
Trading provides the lowest-barrier, most efficient access to “borrow” tens, or hundreds of thousands of dollars in your bid to make a profit.
And the only collateral you’ll need for that is a measly 1% – 2% of the asking amount. There is no other business in the world (not even stock or futures trading) that can give you that kind of raw borrowing power.
Of course, as Uncle Ben told Peter Parker (aka Spiderman), with great power comes great responsibility.
The flip side to having so much borrowing power, is that you can financially ruin yourself if you go about it the wrong way.
That’s the Darwinism behind capitalism – the capable traders win, and the incompetent traders lose. It’s the law of the jungle.
Good traders use leverage to advance their goals, while bad traders use leverage to speed up their demise
This is why I always emphasize having a good trading education. It’s the fulcrum that determines whether leverage is used to help or harm you.
Limited Downside Risk
One of the biggest risks of running a traditional business is that you personally stand to lose more than your initial investment.
If your brick and mortar business doesn’t work out (for whatever reason), you may be personally liable for the debts of your business – including outstanding payments to your suppliers and contractors.
Imagine you’re running a store that sells custom-made furniture. You’ve ordered a whole bunch of raw materials, got your workers to craft a whole line of new designer furniture, and signed a 12-month lease for the storefront where you’ll be selling your works of art.
Alas, 6 months later you’ve sold only 5 chairs, the business is drenched in losses and it suddenly becomes clear that this business isn’t going to survive.
What are you options now?
Well, you could
1) Remain in operation, and pray
2) Shut down the business, and get sued by your suppliers, workers and landlord for not paying them like you promised. Your personal assets may be seized and sold to pay your creditors. You’ll most likely be declared bankrupt
3) Quietly sell all your stuff and book a one-way flight to a faraway land, never to return
The risks associated with traditional businesses are often too impractical for the average person to consider.
With Forex trading however, your losses are (99.9% of the time) limited to the capital in your trading account. Only under very extreme circumstances will you ever be at risk of losing more than that.
Flexibility, Adaptability, Survivability
Getting into business is the most likely way to attain wealth. Unfortunately, in the event that it doesn’t work out (which is 80% likely, according to U.S. statistics), the downside is often too painful to bear.
Now compare this with trading.
The moment you realize that a trade isn’t working out, you have the option to immediately stop the bleeding, and live to fight another day.
There is no waiting to liquidate your assets, no complicated forms to fill, and no impatient creditors to appease.
You have full control every step of the way. You have the flexibility to immediately alter your situation, if you choose to.
And in the worst case scenario, even if you messed up in the worst possible way, you may only lose the capital in your trading account and not a cent more.
Compared to traditional businesses, the potential upside of retail trading is virtually unlimited.
If you’re a competent trader, your profit potential is limited only by your ability to handle a large trading account.
Some traders can’t handle an account larger than $5 million, while others can’t handle even $50,000.
Whatever the case may be, your profit potential will be limited by yourself, not external factors.
No Inventory, Staff, Bill Headaches
In trading, you only have 2 things to focus on: your strategy and yourself.
You don’t have unsold inventory issues, no staff-related troubles or bills to worry about.
Really… do you need more reasons?
Trading Will Never Become Obsolete
As long as there’s an economy and a market, the money-making skills you pick up as a trader will never become obsolete.
It’s the best career insurance you can have.
Contrast this with the 3-4 years university students spend in school, only to find the information and skills they’ve learned to be irrelevant by the time they graduate.
We live in a fast changing world, but the skill of trading is one that will always remain useful.
A personal favorite of mine – you don’t have to be trading from a permanent location.
You can trade anywhere in the world with a stable internet connection, which renders constant travel to be a real option for you.
Life > Trading
Life is not just about trading, but trading enables what I consider to be a good life.
I firmly believe work and life cannot be separated – your work will influence your life, and your life will influence your work.
I am not just a trader – trading is just a part of my overall strategy in life.
What’s your life strategy?
If you don’t have one, chances are that someone else is making that decision for you.