In the last decade, stock and forex trading has become normal; it’s no longer reserved for the revered few stock traders or the suits on Wall Street. Of course, this differs from saying anyone can become a successful stock or forex trader. It does require skill, knowledge, and some experience. But trading expertise has become more available, and trading platforms are now more accessible to the general public. So what does that mean for you as a business owner and how can trading lead to financial growth?
As an entrepreneur, you know that your business cannot survive on passion and drive; it needs funds and one of the main reasons for business failure is mismanagement of funds. So today, we look at how you can use trading strategies to help you with your financial management and growth. If you are unfamiliar with the tactics and jargon used on trading platforms, it’s okay; we don’t expect you to become an expert right away.
Similarities Between Entrepreneurship and Trading
Below are the details of trading.
Starting a business is risky no matter how sound your business plan is. Trading is risky, even if you stick with penny stocks and don’t venture into crypto or forex. Traders and business owners need to be able to evaluate risk factors and know how much risk to assume for themselves.
As a trader and business owner, you need to be able to think outside the box and come up with creative solutions to current problems, and be adaptable to what comes your way. From managing cash flow to dealing with crashing markets, both these roles need you to be flexible.
As an entrepreneur, you assume all the risk and are responsible for all the decision-making in your business. Therefore the buck starts and stops with you; it’s the same for traders; there’s no one else to shift the blame to. If a bad call is made, they are stuck with the consequences of that call.
Trading Strategies Businesses Can Use
Below are some strategies for trading.
Buy and Hold
In trading, this is when you purchase an asset intending to hold on to it for a long time. These assets usually appreciate over time and have a history of slow and steady gains; mutual funds or index funds would fall in this category. For a business, an example of a buy-and-hold investment would be property, especially if you buy the property you operate from or are using for other business operations. Owning the property you operate from will save you money in operating costs and the risk of being evicted one day; you can also renovate the property and add more value. You can also lease out your property, which will help with cash flow and operations.
Value investing means buying an undervalued asset with the belief that its value will increase once market conditions change. This concept was made famous by billionaire Warren Buffet. You can also use this concept as an entrepreneur, but you must analyze your environment and cash flow thoroughly. You don’t want your funds tied up in an asset you can’t sell because you misread the market. An example of value investing could be buying machinery or equipment you don’t use but would be in demand by other industries. Construction companies always need equipment and trucks to lease, and you could hire or sell this equipment when the environment changes.
Swing Trade Strategy
In trading, this strategy is about buying a security when you suspect it will rise and then selling it when you imagine it will fall. The swing trade strategy can work best for those businesses that sell products. When a specific product is in high demand, you can buy it in bulk, negotiate a discount with your supplier, and then resell it with a higher markup. This will increase profits, and should the demand decrease, you can lower the price without losing your profit margins. Hopefully this article provides the right trading strategies for financial growth.