The Best Business in the World
The problem with starting and running a business, however, is the cost.
If you consider all the expenses involved, even a smallest local business will easily burn through mid-5 figures a year in overhead⁽³⁾.
And if the business fails - which happens to 50% of all businesses after 5 years⁽⁴⁾ - there's a good chance you'd be financially ruined.
That's the reality of traditional entrepreneurship. It's a game where the costs of entry, participation and failure are exceptionally high.
Now what if I told you there's a better game you can be playing, where the costs are much lower?
Forex Trading Business
Cost of Failure
A Forex trading business not only avoids most of the drawbacks of traditional entrepreneurship, it provides many additional benefits as well.
Here are some of them in further detail:
Ease of Leverage
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?”
With Forex trading however, financial leverage is readily available.
It's the lowest-barrier, most efficient way to “borrow” tens, or hundreds of thousands of dollars in your bid to make a profit.
And the only collateral you’ll need to provide is a measly 1% – 5% of the "loan" amount.
No other business in the world (not even stock or futures trading) can give you this 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 blow up your trading account 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.
Later on in this guide, I'll show you how to use leverage responsibly in your Forex trading business.
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, hired workers, got them 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 it isn’t going to survive.
What are you options now?
Well, you could
- Stay in operation and pray for a miracle
- 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
- Quietly sell all your stuff and book a one-way flight to Nicaragua, never to return
The risks associated with a traditional business are often too impractical for the average person
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.
All businesses have some form of fixed cost or overhead expenses to pay for.
If you're a typical business owner, your rent, utilities and staff salary expenses alone are likely to be at least mid-4-to-5 figures. This is what you'd have to pay every month, regardless of whether you made a profit.
These are heavy financial obligations that most people are unable to bear.
With a Forex trading business, however, your only ongoing expenses are limited to electricity, an internet connection, and maybe a laptop/computer every 2 - 3 years.
All businesses have a natural cap to their maximum revenue.
If you run a neighborhood coffee shop for example, your revenue is restricted by the number of people in the neighborhood and the number of customers you can serve per hour.
Even if you're world-class at running coffee shops, you'd only be able to sell a few hundred cups of coffee a day, at the most.
With Forex trading however, your "cap" is only limited by the global demand for hundreds of billions of dollars worth of currencies each day.
In other words, unless you're already making a boatload of money (that's a technical term), your income potential is not going to be limited by external factors.
In a traditional business, mistakes can be very costly.
If you signed a bad contract, or took on an obligation that proved too expensive to maintain, you can't get out of your liabilities easily or cheaply.
Compare this with Forex trading - the moment you realize a trade isn’t working out, you have the option to cut it immediately without penalty or delay.
The same goes for valuable opportunities that suddenly appear.
In a normal business, you might take weeks or months to restructure operations in order to take advantage of new opportunities that show up. By then, however, the opportunity might be over.
With Forex trading, there's no lag to capitalizing on such opportunities - you can immediatelyadjust your trading approach to take advantage of them as they occur.
Imagine you own a small graphic design business. After 3 years of hard work you are ready to expand to a second office.
Now between finding a suitable office space, renovations, hiring and training staff, the earliest you can get the second office up and running is probably 2 - 3 months, if you're lucky.
With a Forex business, no such luck is required. In literally a fraction of a second, you can double, triple, or quadruple your trading operation simply by increasing your trading lot size.
This is a highly underrated characteristic of a trading business.
Without any extra cost or effort, you can immediately expand the scale of your operation at any time.
Rapid Income Growth
Taking the same graphic design business, let's say as the owner you make a net profit of $5k per month, per office, and that you open a new office every year at the cost of $125k per office.
By the end of the 5th year your income goes up to to $25k per month.
Now what if you ran a Forex trading business instead?
Same as the graphic design business, let's say your income starts at $60k per year, and you expand your operations by investing $125k into your trading account each year.
With a monthly capital growth of 4%, how much do you think you'd be making by the end of your 5th year of Forex trading?
Answer: $55k per month.
In a normal business, your income goes up incrementally as you expand via arithmetic growth (i.e. in fixed steps).
With a Forex trading business, your income goes up exponentially via geometric growth (i.e. compounding).
Note: We're not even taking into account the growing asset (trading capital) you'd be accumulating as a trader, as opposed to the depreciating assets of office furniture and equipment you'd have to spend on as a traditional business owner.
Many businesses are highly dependent on a few companies, suppliers, platforms, and/or customers.
They are therefore vulnerable to major disruptions on both the demand and supply sides of the business equation.
If, for example, you run a successful retail clothing store at the mall, and your landlord decides - for any reason - not to renew your lease, your existing business is pretty much over.
Similarly, if your customers change their preferences or demand less of your product, you must fundamentally change your business model or prepare to shut it down.
These are common problems faced by most businesses, but not the business of Forex trading.
You see, with a Forex business you'll never have to worry about demand - the world will always have a need for currency exchange.
As the owner of a Forex business, your only point of external risk is your broker, who is essentially your "supplier".
Thankfully, there are plenty of well-regulated, homogeneous broker alternatives to choose from, so your trading business will have a near-zero risk of having significant operational disruptions.
Compared to 99% of other businesses, a Forex trading business is highly robust and resistant to external shocks.
No Inventory or Staff Problems
In a Forex trading business, you only have 2 things to focus on: your trading strategy, and yourself.
You don't have to deal with inventory problems or staff-related issues, which is a BIG advantage.
The fewer "moving parts" you have in your business, the fewer things can go wrong and the fewer headaches you'll get.
The typical entrepreneur works more than 14 hours day, 7 days a week in order to maintain and grow his business.
This places a tremendous strain on his health and relationships, which are usually the first casualties of his entrepreneurial ambition.
A Forex trader, on the other hand, faces no such trade-off.
You see, unlike the running of a normal business, the running of a trading business does not require long work hours.
In fact, one of the things you'll come to learn is that good trading involves very little screen time. There's an inverse correlation between a trader's profitability and the frequency of his trades.
Right now I spend less than 2 hours a day (in total) on my trading. The rest of my time is spent reading, writing, going to the gym, learning new skills, and various leisure activities.
Note: When you first start out, you'll have to spend time developing a viable trading strategy. But once that's done, you shouldn't be spending a lot of time each day to run a profitable Forex business.
One of the best things about a Forex trading business is that the only physical requirement is the ability to operate a laptop.
You don't need to be able to drive, walk, or even get out of bed. Heck, you could run it sitting in a wheelchair and be at no disadvantage.
This is something you can do well into your 70s and 80s, for as long as your mind is lucid.
How many other businesses can say the same?
This is a personal favorite of mine --> You don't have to be trading from a fixed location.
You can trade from anywhere in the world with a stable internet connection, which renders regular travel to be a real option for you.
If you really think about it, the business model of Forex trading has so many benefits over virtually all other business models, it borders on the ridiculous.
I predict that over the next 10 years, we're going to see a generation of solo trader-entrepreneurs that will take over the private investment and hedge fund industry.
Now before we get too ahead of ourselves, let's get real and debunk some of the most common myths and misconceptions about Forex trading.
Continue to the next page
Forex Trading as a Business: Getting Real
About the Author
My name is Chris Lee and I've been a retail Forex trader since 2005. I've gone through many successes and failures, including managing a 7-figure investor account (which was great), and losing a 6-figure personal account (which was not great).
You can check out my live performance results here.