Marketing Entrepreneur. Day Trader. Business Contrarian.

How Day Trading is a Lot Like Business

Posted on Jan 28, 2016 in Marketing, Stocks Estimated reading time: 6 minutes

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This is something I’ve been thinking about a lot lately. That is, how do I build an audience of people who care about what I have to say when the topics I like to talk about are often times on what seem like opposite ends of the spectrum – trading stocks and helping clients build marketing infrastructures. Surely a reader can’t enjoy both types of content (right?), so doesn’t it create a disjointed experience when my marketing colleagues come to my site and see a bunch of trade recap videos? I spent a lot of time thinking about how I need to solve for that, the best ways to segment my email list to account for it, etc. I wasn’t coming to any conclusions I felt satisfied with, so I decided to say screw it and just do me. So far so good, but as a result of this thinking I’ve actually come to realize that a relationship between the two actually existed after all, and in more ways than one.

 

Time

Time is part of everything we do. It’s one of the few variables that’s always on your side and that you can control, so its a shame that so many of us take it for granted and rarely give it a second thought. I actually pride myself on being very effective with my time. It’s something I’ve always been good at, which I attribute to being successful in both marketing and trading. Time needs to be broken down into two parts – planning and speed.

 

Planning

If you think about trading as a process, planning is the most important step and many day traders who’ve mentored me would agree. Planning occurs after hours the night before the next trading day, or early in the morning before the trading day begins. I split all of my research and planning between both times. I’m reviewing chart patterns from the trading day and building a watch list by identifying setups that fit the patterns I’m comfortable trading, down the to finest details by setting target entry, exit, and risk level prices. If the setup doesn’t play out exactly like I wrote it down (with a small tolerance for variance) I won’t trade it. I do this every single day, and the frustrating part is that I may not trade anything the next day, but you can’t manage risk and trade with conviction if you aren’t prepared. Trading is about process. I like to focus on process rather than goals. This becomes easier when you have a plan.

Marketing is very similar in this regard. If I’m building a key technical infrastructure component, planning ahead gives me the foresight I need to know if I’m not considering a certain dependency that could break something – think marketing automation to CRM integrations. If it’s a new marketing program or campaign being launched, I’m planning test messages, landing pages, and testing the tracking configuration to validate that everything runs smoothly before going live.

 

plan-wide

 

Speed

Subconsciously, speed has always been a big part of my life, whether it be relative to cars and racing, trading, or making business decisions in general. I do everything in my life fast. I’d rather operate quickly and have to correct something later than I would take an extra few minutes of time to politic the hell out of it. In that sense, you can argue that planning and speed tend to be inversely related, and I would agree. It’s a battle I’ve had in my head through my business career up to this point. As with everything, it comes down to balance. The term “day trade” alone implies speed. It implies that one enters and exits a position on a stock in no more than 1 day. That means no holding positions overnight. At it’s most granular level, a person could make a round trip trade in a few seconds if price volatility warranted that type of behavior, but the type of positions I typically hold intraday typically last anywhere from 10 minutes to a few hours. I don’t aim for quick scalps, but rather the “meat” of a longer term (again relative) move.

Even still, pennies matter when placing buy/sell orders. I liken speed in trading to a sniper in battle, but rushing for the sake of being fast is not the same as being fast when the moment counts. If you’re just rushing through your research and making decisions quickly without much foresight, you’re going to introduce unwanted emotions and heighten your anxiety. These traits will hurt you when you need to be fast when a great opportunity arises and the moment counts, whether it be an ideal trade setup or important business decision.

 

speed-wide

 

The relationship between effective planning and operating quickly has always been something I’ve tried to balance harmoniously and I’ll admit I’m still not great at. I’m a much better operator than I am a planner, but if you want to be a great trader or succeed in business, the first step is the have enough self awareness to know what you’re good at and where your skill set lies.

 

Market Dynamics

Perhaps the most obvious component of all, is the market itself. I love the market because it levels the playing field for all competitors. The market is the same for everyone equally at any given moment in time. Whether it’s business or trading, the market is always changing. When I first started trading, we were nearing the peak of a bull market and it seemed that every day there was a new stock spiking 50% or more, but I was too inexperienced at the time to truly understand the market and how fortunate I was to be trading at that time. Since I wasn’t prepared, many of those opportunities passed me by. Fast forward to 2016, the bear market is just beginning. Market dynamics have changed and as I learned and grew as a trader, it was important that I adapted to these changing conditions in parallel. The same concept applies in business. When running a company, the market is often susceptible to changes that coincide with changes in the economy. Over longer periods of time, shifts in consumer behavior occur that we must adapt to as business owners. For example, we no longer consume video the same way we used to. Broadcast networks are shifting money away from TV towards streaming alternatives. A lack of adaptability is one of the quickest ways of going out of business. Just ask Blockbuster.

I hope this article gets you to think about how these components apply in your own trading or business strategy. Do you have other thoughts? Let me know in the comments below.