The skills learned from trading can be beneficial in a business environment, especially when it comes to your finances. One of our previous posts emphasised this point, noting that just like trading, handling finances in your daily schedule train you to build wealth. Additionally, there are numerous other ways trading can develop your skills in financing. Here are 5 of them.
When it comes to Forex trading, savings are just as important. A rule of thumb for money management in Forex is to never risk more than 3% of your capital per trade. You can apply this to your business savings as well, even with a bigger percentage. When investing, you don’t always have to shell out huge sums of the company’s money, even if the venture seems highly profitable. You need to store extra money for coverage in case your business gets caught up in a costly transaction or incident.
Trading is mostly about strategy. You have to be very careful in analysing your next move as it might take a toll on your portfolio. Forex is still a good example because currencies can be extremely volatile. FXCM explains that investors need to be very careful when buying and selling pairs. Although, this trade has the largest market and it’s easy to interact with other traders, it is tumultuous in nature. When it comes to financing, be strategic with the company’s expenses, as some costs may require immediate payment, while others can accumulate a debt. Know when and how much to pay for certain expenditures so your business finances won’t suffer.
There have been cases in which partaking in certain risky trades eventually increased the stakeholder’s money. For example, Bitcoins were only worth £0.72 per coin in 2011, and its investors were told they were making a big mistake. Now, Bitcoin owners and traders are earning huge revenues because the price of Bitcoin has surpassed the £10,000 mark. Finance writer Ewan Roy explained that analysing and mitigating risks are also important to your company finances because they can increase your revenue. Typically, the higher the stakes, the greater the reward, and risk analysis helps you to know when to raise the stakes.
When you’re trying to trade a commodity, you need to maintain good communication and show proper manners to convince your fellow investor that entering a deal with you will be beneficial. Consequently, these skills can also help you manage your company’s money, such as getting everyone to agree on a certain investment or setting payment terms with your clients. The DIIS of Australia stressed the significance of payment terms because they can minimise your company’s costs and maximise your income.
Investors have learned to trust their intuition when it comes to trading, as doing so can lead to good deals or security against economic instability. In fact, Cambridge University found that ‘gut feelings’ lead to more successful hedge fund trades, with finance researcher Dr John Coates stating, “In economics and finance most models analyse conscious reasoning and are based on psychology. We should refocus on the body, or more exactly the interaction between body and brain.” In financing, trusting your gut may lead to growth or help avoid catastrophic incidents because you have a good idea of the things that can happen. This accumulated wisdom stems from past experiences. Make sure you examine as many possible outcomes as you can when it comes to handling money.
Trading is a good learning platform when it comes to financing. It’s a great way to hone your skills and develop a deeper understanding of how to handle money properly.