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Treating Day Trading Like a Hobby Versus a Business

Jul 30, 2008
First, let's start off by understanding that there is no such thing as a day trading hobby. Traders must have superior trading habits that come from knowing their strategies and their trading. Trading discipline and making only quality trades is something that comes from experience that can only be created from an active role in the financial markets. The active, professional trader is far more profitable due to experience and knowledge from consistent trading than the hobbyist investor will ever be.

Hobbies don't make money

If you're trading for a hobby, you're likely to be in a position where you're willing to accept losses. If this is your position, then more power to you, as you're able to do something that most people can't, while accepting any possible losses. Hobbyists do not need to pay as much attention to trading structure or even trading success, but should be willing to pay the price for both in limited gains or even losses. Trading as a hobby is difficult, as the time constraints and limited reason to produce profits will make many traders unprofitable.

Like a business

To maintain a balance between enjoyment and profits, traders should instead focus on producing profits much like a business, using proven techniques and strategies to produce profits - not for fun, but for profit. Life-changing results and financial freedom do not come from enjoying a hobby, but running a business that produces consistent profits, whether selling lemonade or buying and selling derivatives.

Short term trading

Day traders and swing traders are much like the day to day entrepreneurs who go to work to build their business and their bankroll. Day traders work around the clock to be the first in and the first out of a position - much like businesses work to be the first in their marketplace. The time advantage is something few hobbyists can parallel, as the amount of time to produce profits is more in the range of the day trader or swing trader than in the small time trader who wants to have fun and possibly make money.

How to treat this like a business

Full-time day trading is easy to view as a business as it requires all the time and complications of running a business, while the bottom line is entirely dependent on the profits generated from the said business. A professional trader is much like an entrepreneur or a salesman on commission; the amount of time put into the business is nothing compared to the profits that come out of it. Whether you are a hobbyist or full-time day trader, core trading skills and a handle on the basic fundamentals will always prove profitable.
About the Author
Leroy Rushing is an active, professional day trader; trading coach; and author. He is the Founder and CEO of Trading EveryDay, a provider of educational trading products and services that are available worldwide. Trading EveryDay has complimentary/FREE products, a Tools of the Trade eBook and a Trading Room Report , that are downloadable for your convenience.
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