Objectives

The Business must have a set of objectives and goals, before the plan can be laid.

I want to demonstrate something here, and I’m going to use two people, an 80 year-old successful businessman, and a trader friend of mine who day trades with many millions of dollars.

I read an article a journalist had written, of an interview she had with a businessman who had just turned eighty years old. The business is quite large by South Australian standards and one of the questions she asked was; “When are you going to retire?”

His answer was, “Never, I love my business and my job as the business owner too much”. I remember thinking at that time, my god how boring! All I had ever associated with this particular business was cardboard and a huge warehouse.

But of course I later realized that his job as the business owner was not to fold cardboard in a huge warehouse. This company is huge. His job is to be an entrepreneur and look for ways to expand the business. When I realized this I then thought, ah yes, that is far more exciting.

As a trader, you have to decide whether you’re going to be happy getting a wage from your business or whether you want it to expand over time.

My next person is a trader who trades full time, with many millions of dollars. He only trades one stock, highly leveraged, and spends several thousand dollars a week just on commissions.

I was talking to him on the phone one day and he happened to be taking a beating on his positions, in fact he was down about 10% of his capital. I asked him if there was much difference between a trader with a smallish float of say, around $20-50,000 taking a 10% beating on one day, compared to someone with a $10 million account. Are the emotional affects different or do you just treat it like a numbers game. His answer was…well he actually swore at me first!

He realized that my question was not intentionally naïve, and that I was really just after another person’s perspective on trading and emotional awareness. Besides, he is a day trader and I am not, and so there is already a difference in how one approaches certain aspects of trading, but it doesn’t hurt to hear how someone else handles their emotions.

There were a couple of good points he made. One was, “If you compare your overall wealth or your trading capital to your yearly cost of living, that is the cost to run your household and basic needs, you can see that it is quite possible for someone with a large account size to become complacent. They could relax on their rules because they fall into the trap of thinking that there’s plenty in reserve and so if I take a big loss, it’s not going to affect my overall wealth too much.”

“The problem with this is that you are encouraging wrong behaviours, and you may be pushing your trading system beyond its capabilities, among other things.”

Another point he made and this was from the other side of the coin. “Imagine a person who grew their capital quite quickly, or had never experienced losses of this magnitude before. They’re not emotionally equipped to handle it. They think about the size of the loss in money terms, and don’t see that it may be a natural part of their system. They inevitably start to panic, fear sets in and they self-sabotage.”

There’s a famous story of a trader who starts with around $10,000 and always manages to catch the next big trend and turn his $10,000 into around $250,000. But every time he does this, he gives it straight back to the markets. It’s because he has never bothered to equip his mind mentally and emotionally to handle an account size of larger than $250,000.

Now I want to you to think for a while about my two friends, the 80 year-old businessman, and the multi-million dollar day trader. What can you conclude from their stories?

What you should have realized by now is that you have to make a choice. How big do you want your business to become? Do you simply want to make enough each month to live off, would you be satisfied with financial freedom, or do you want it to grow into a multi-million dollar business, turning over more money than you could ever possibly need?

Let me ask you this. If you decide you want a business that will turn over a million dollars a year, do you think you should be focusing on your trading systems? If you said yes then give yourself a big cross!

To start from a small account and then turn it into a million dollar business will require a massive change in you. This can only occur if you are prepared to do the necessary work on yourself. Studying trading systems will not expand your minds ability to cope with larger amounts of money, whether it be losing or winning.

Like the 80 year-old businessman, you have to have an entrepreneurial spirit that seeks out the solutions to your growing business. You need to study the ones that have been there and done it and not their trading systems either…no; you need to study the traders themselves.

Let’s look at some other goals you may have for your business. Do you want to build a nest egg? Do you want to create an income-producing asset? Do you want other’s trading for you? Do you plan to teach or coach, whether it is your children or strangers? Do you plan on trading other people’s money? Do you plan on becoming a market maker or a broker?

These are just some of the other possibilities you may want to consider. All of them are achievable if you just plan on it. Take some time to think about this and write down any ideas. What are the business’s name, its mission, its vision, and its goals? Don’t concern yourself too much with the shorter term goals for now as we’ll be covering them soon, just take a snapshot of your trading business as you want it to be.

Business Snapshot

 Try not to focus just on the money as a goal or mission, but rather what money can do. If you do use money, try and use things like consistent returns and ROI instead of or as well as a particular amount, as an example.

 Name________________________________________________

 Mission_______________________________________________
 
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 Vision________________________________________________

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 Ultimate Goal__________________________________________

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 5-year Goal____________________________________________

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Backward Planner

 Now do a backward planner of what you’d need to achieve before you achieve the above. So for example if one of your goals is to trade other peoples money, then before you can do that, you might want to achieve 3 years of consistent returns of 40% p.a.

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Move on to Step 2 - Module 3 > Business Resources