Using a Business Model for Forex Trading

Filed under: Learn Forex Trading |

Screen shot 2013-05-10 at 09.44.46If you want to be really successful as a forex trader, then you will not do yourself any harm at all by treating your forex trading as a business in every single way. This is both a mindset, and a practical issue, and is something that I would like to run through a little bit with you today.

 

To begin with any business need physical assets. So, for a newsagents for example, you would need a physical property from which to sell newspapers, you would need capital to pay for stock (which you can then sell at a profit), you would need to either pay staff or yourself a wage, and then there would be miscellaneous costs such as energy and water bills, taxes, telephones bills, etc. You also need to think about the costs from stock that you could not sell, or damaged stock. As long as the cumulative profits pay for the cumulative costs, and there is some left over, then the business will be profitable; and this is the same way that you need to think about your forex business.

 

When trading forex, you will need a computer and a place to trade from (if you can do this at home, then you will save some costs), and some capital to trade with. You will accrue broker costs in the forms of either the spread or other transaction costs, and you will regularly take losses when you trade (which should be seen as the cost of doing business, just like unsold or damaged stock is for the newsagent). Moreover, you should run your forex business just like you would any other business, and keep diligent records and review any transactions that you have made to try to improve future performance. Of course, if you make good profits, you will also need to think about paying tax (which could be seen as income tax or capital gains tax by your accountant). However, the main thing is to think about forex trading as a business rather than a casual hobby, and if you do that – then you are much more likely to be successful.

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