Treat Your Trading Like a Business

Have you ever wondered how in the world large businesses or corporations such as GM or IBM just manage the small day to day tasks of operating and managing such huge concerns? It is just mind boggling to think about the millions of little details which have to be handled just to keep the doors of such complex corporations open! I’m not a CEO or CFO type and I certainly have no training or expertise in those areas, but I have spent a lot of time talking to folks whose job it is to run large and medium sized companies in an effort to understand how to better run my own, comparatively tiny business. What I found was truly amazing, if not totally refreshing!

What my searching uncovered was really encouraging in that it showed me that their businesses, no matter how large or complex, all have basically the SAME three requirements. The details are a bit different to be sure, but they all depend primarily on effective management and sound decisions in three areas; cash flow (or income), a source for stabilization of that income, and long term growth. I describe this a ‘encouraging’ in that my small business … in fact ALL businesses … have the same needs in the same areas, no matter the size of the concern. Let’s take a quick look at all three of these areas.

The first and most important of the three is the need for consistent, sometimes daily CASH FLOW. This area is prioritized above the others because it is here where the money is made to meet expenses of continuing in business. Face it .. business have bills to pay. General Electric must meet it’s obligations just as surely as we must in our family’s daily existence. AT&T has daily obligations … IBM and Microsoft face an overwhelming amount of daily expenses … YOU and I are no different! We just operate on a different scale … thankfully! To the extent that a business is able to meet it’s expenses – pay it’s bills, if you will, it should, all things being equal, remain a viable business concern. The instant a business fails to generate these very short term funds is the instant it begins to go out of existence!

STABILITY in cash flow generation is almost as important but is prioritized down a notch. The main reason for the ‘downgrade’ if you will is the nature of the need for cash flow. The expenses must be met, even if on a ‘hit or miss’ basis. Consistently generating that money is ‘stability’, crucial in need but behind the actual ‘generation’ in position. It is important to be sure as stabilizing at a level LOWER than necessary to meet expenses is unacceptable, for obvious reasons!

This stability is achieved in most business by keeping a ‘pipeline’ full of forthcoming business, designed to provide regular cash infusions periodically. In other companies, stability can be achieved by … well, just having a ton of cash on hand! Perhaps one of the best examples of this is Microsoft. During the recent onslaught of government or regulatory attacks accusing the software giant of monopolistic practices, fines in the millions of dollars were tossed about as potential ‘punishment’ for these alleged violations. Can you imagine how LITTLE would be the impact of a $10 million “fine” on a company that has $50 BILLION ‘unattached’ in the bank??!

The final area of consideration is long term GROWTH. Once a company has developed it’s business plan to the point that it can remain a financially viable entity, it must then concern itself with the concept of getting bigger. While specific growth is different for everyone the fact remains that you can’t just ‘stand still’ in business. You’re either growing or dying! The easiest way to grasp this QUICKLY is to think back to the first job you had. Focus on the INCOME that job provided and now try to imagine existing today on that income. The same principles exist for businesses as well. You can’t stand still there either! They must meet (and beat) the competition, so research and development are necessary. Technological advances come along and the number of employees must be increased to handle the new jobs these advances create. We could spend volumes on this aspect, but I think you probably get the picture!

So, all businesses, large or small have these same three areas of concern; cash flow generation, stability and growth. Now, let’s try to pull these concepts down to a level where we might be able to see a direct connection to our trading businesses.

We are traders. Trading is our business. Let’s agree that we have needs for cash flow, stability and growth in order to manage our trading business more effectively. Trading is not just throwing money at the stock market in some ‘willy-nilly’ fashion. We have to define our trading business in such a way that we can apply sound business principles to insure that we truly have a ‘going concern’. Here’s how I do that in my business and how I teach others in the trading labs to do the same thing. Lacking both the time and room for a detailed description let me summarize what we do…

First, my cash flow is a function of my daily, short term trading. This is not day trading by design. Rather, I use one of several strategies designed to get into a trade and then back to cash in a 1-5 day period. Trade only the journey the stock normally takes each day, being content with SMALL (daily) profits. Here are some givens:

  1. You will NOT be profitable on every trade.
  2. Your business does NOT depend on the success of your next (or your last) trade, so EMOTION has no place on the trading floor!

Stability in trading comes from the same place for us as for any other business; either a full pipeline of pending business or CASH in the bank. We can overcome a shortfall in COH (cash on hand) with successful medium term trades (30-90 days in length). I like to use covered calls and/or spreads to provide that regular cash infusion providing a leveling effect in the short term account.

Growth comes from successful long term (greater than 90 days) trading. For this, my favorite strategy is selling naked puts on high quality Blue Chip stock (however you define ‘blue chip’). A quick trip down this lane shows us picking out ‘chippers’ on weakness, selling puts having strike prices just below earlier PEAK values. The operative here is that we don’t really care if the stock regain these earlier values … just moving toward them will give us most of the profit we seek!

So there we have all three management aspects of any successful business; cash flow, stability and growth. Treat your trading like a business and it will treat you like royalty! Make it a great day!


Dealing With Breakups After Investing a Ton of Emotional Energy

I met Laura when I was 25 years old at the beginning of my college senior year (I was a later starter). She was an incoming freshman who had just turned 18. I never thought we would have dated for over 5 years. We both fell in love with one another and we were both as happy as could be, but isn’t that how all relationships first start off? We had our share of arguments, but we also had our share of great times. I spent nearly one-fifth of my life with this amazing young woman, so why did it have to end 5 years later? I’m not going to mention the reason why we broke up because it ultimately boiled down to compatibility, something we were both unable to see in the beginning because we didn’t have the life experience and maturity to see it.

Even so, the break up was extremely difficult. People break up for different reasons. Some break ups are fairly quick and easy, while others can be excruciatingly difficult and hard. The more time you spend with someone else and the more emotional energy you invest in them and the relationship, the harder it is to let go. I can’t tell you how many times I’ve wanted to break up with someone only to find myself postponing it because I didn’t want to hurt them. That was not a good strategy because it delayed the inevitable and actually made it even harder.

When you invest your emotions on another human being you feel vulnerable. So when the break up comes it can be really hard to deal with. Some of the most difficult break ups to deal with are the ones that involve infidelity or where the other person breaks up with you and you do not want to break up. No matter who does the breaking up, here are a few things you should keep in mind:

1. Resist The Temptation To Contact The Other Person – This can be hard to do, especially if you really miss the other person. One of the fastest ways to recover from a break up is to cut off all contact with other person, even if you both agreed to remain friends (in that case you might need months to recover before you can be strong enough again to see the other person in a non-romantic way). This also includes putting away anything that reminds you of them. You might need to delete all the photos of them from your Facebook or MySpace accounts, your computer, or even your camera (or put them in a folder to be viewed much later in the future).

2. Stay Busy – Now don’t take this to extremes because you should have good balance in your life. Some people will dive head first into work and log into 12 to 15 hour days just to stay busy, which is not good for you health. What I mean by staying busy is to make sure that you’re not spending too much time alone doing nothing. If you’re just lying down on your bed or sitting somewhere you’re going to be tempted to get locked into thinking about the other person over and over again. When Laura and I broke up I focused on my work, my hobbies, and made sure I got plenty of exercise by playing tennis, basketball, and going on long bike rides with my friends.

3. Continue Living – Staying busy is a good thing, but you also want to make sure that you don’t stop living. After my most recent break up I continued going to the movies with my friends. I still went out to eat. I attended a few happy hours with my co-workers and I even went to a friend’s wedding as his best man. Break ups can be tough, but don’t use that as an excuse to stop living your life. Remember, time is one resource you can never get back, so keep on living despite how you may be feeling at the time.

4. Add Realism To Your Emotions – After my most recent break up I used a meditation technique that really helped me out. I sat on my couch, closed my eyes, and forced myself to think about my life a few months from now. Then I went a year ahead. I injected realism to my view of things by realizing that how I was feeling was going to be temporary. I also looked into the future and also understood that I would eventually meet someone else. I then pictured a close friend of mine coming to me for my advice as though he were in my situation and I listened to my own advice that I gave to him. I would do this at least once a day and it only took about 3 to 5 minutes each time. Though it did not fully take away all my pain, it did aid in giving me perspective. And that made the healing go by much, much faster.

Make No Mistake About It Network Marketing Is A Business!

How fast your network marketing business grows depends a lot on how serious you see it as a business. If you were to start a traditional business with a capital of say, US$100,000, what would you do? You would indeed invest a lot of time and effort just to get it started. Drawing on my own IT System Integration business experience, you would be looking at the issues below, just to name a few:

- business model (retail, wholesale, products or services)

- business name (brainstorm for a relevant name)

- location (do I need walk in customers?)

- sales and marketing (how do I market? through advertisements, word of mouth, exhibitions?)

- accounts (who will keep my accounts and pay salaries?)

- human resources (who to employ and how to employ?)

- expected breakeven period (when do I start making money?)

- expected profit (what profit am I expecting in the long-term?)

You would be take the business very SERIOUSLY! You would prepare to work very hard, even sacrificing your weekends and Public Holidays, for perhaps the next 1 year or even longer, before your business takes off and becomes profitable. In other words, you will OPEN SHOP everyday!

In network marketing, many people do NOT treat their business as a business.

Why do I say that?

That’s because they don’t plan like they do in a traditional business. They have no goals, no strategies, no plans!

And worst still, they don’t take action!! That means, they do NOT open shop much, definitely NOT everyday like they would in a traditional business…

Network marketing is a Word-Of-Mouth referral business. It’s been around for more than 50 years!

So, to open shop everyday in network marketing simply means to share with someone everyday, be it your family, friends, business associates, etc. However, many people, after joining a network marketing company, don’t do that. They will share only if they feel like or when they happen to come across someone who’s interested.

Thus, it boils down to one thing – they do not take their network marketing business as a real business. And no wonder, their business don’t grow fast enough…and after a few short weeks or months, they’ll proclaim that this business cannot work :-)

Why so? Frankly, I believe that there are many factors that have to do with human psychology. But one reason I can think of is that because they start with such a small sum of money like a few hundred dollars in most opportunities, they can afford to lose it and therefore do not take their business seriously.

And guess what? These same people will move on to the next great opportunity as soon as it appears on the scene! Soon, these network marketing or MLM junkies will soon ruin their own credibility and reputation in their own circle of friends and contacts. Plus, each time they move to the next opportunity which they think is their “magic” pill, they are indeed uprooting all they have planted and then planting a new seed once again.

When you treat your network marketing business seriously, your business will surely grow over time! That’s the universal law of sowing and reaping.