Traders are entrepreneurs

Last week I attended Web Summit, a place where entrepreneurship is a keyword.

The thing with entrepreneurs is that nearly 75% of startups fail.

Any innovative idea that becomes a successful business is a one in a million attempt to do something in a way nobody ever thought about (or thought about but did not have the courage, resilience or inspiration to transform into a reality).

Around 85% of traders lose money. If this number scares you don’t read this article.

Harvard Business School?defines entrepreneurship as “the pursuit of opportunity beyond the resources currently controlled.”

Obviously, when you become a trader you are not creating a brick-and-mortar business, you are not even inventing anything new, you are merely pursuing opportunities, using the many platforms and apps that allow you to trade on international markets.

The concept of opportunity can be perceived as a myriad of things and indeed, when you trade, you identify opportunities to win money by opening buy or sell positions in financial markets.

To become a trader you need to have some entrepreneur DNA.

You might think I am stretching a lot the idea of entrepreneurship, but my point is that if you don’t have in you the curiosity, the risk-taking stamina, and the bold spirit of an entrepreneur you’ll have a hard time dealing with the uncertainty, disillusion and failure that comes out from being a trader.

After reading the characteristics that successful entrepreneurs point out as being critical here is my interpretation of how such features apply to trading (I selected 8 out of 10):

1. Curiosity

Successful entrepreneurs have a sense of curiosity that translates in constant inquisitiveness. In trading you must continuously look for knowledge that can give you a greater perspective of the markets and thus allow you to make more accurate decisions. It’s not like you learn the basics about technical analysis and automatically become a trader; it's a never ending process that requires curiosity and discipline.

2. Structured Experimentation

I guess you can also call it “structured failure process”. In trading you will lose money. To turn loses into apprenticeship, as if they were the investment you have to make to get an education on trading, you must keep a record of your deals, detail the reasons that supported your decisions and a thorough analysis of the causes that lead you to failure.?

3. Adaptability

Entrepreneurs must be adaptable if they want their business to see the light. Traders must have the same flexibility to adjust to market volatility. Prices keep moving up and down, sometimes in crazy and unexpected patterns, and it’s nearly impossible to be prepared for every scenario. In such an unstable setting you can only become a successful trader if you don’t panic and fine-tune your strategy as it happens.?

4. Decisiveness

All entrepreneurs are used to make difficult decisions. Traders must also be proficient in deciding whether to enter a deal and specially when to hit the stop button. Being decisive doesn’t always mean being correct. You must have the confidence to make challenging decisions and live with them even when results don’t turn out the way you expected.?

5. Risk Tolerance

Entrepreneurship is often associated with risk. Trading is all about risk. There are two inevitabilities you must accept: first, you must undertake risk, and second you must learn how to handle it. Entrepreneurs’ risk tolerance is tightly related to their efforts to mitigate it. Since trading is not gambling you must have a risk management strategy and stick to it regardless the nuances in your emotions, guts and feelings.

6. Comfortable with Failure

Successful entrepreneurs must prepare themselves for, and be comfortable with, failure. The same happens with traders. It’s just like becoming an athlete: high performance is not a moment but the result of consistency. To thrive in sports you must train hard, eat well, sleep enough hours… and even then, in the D-Day you can fail. But there is a huge difference between failing with no preparation from failing when you have a winning process that you trust can lead you to victory.

7. Persistence

An entrepreneur never gives up easily. Neither can you as a trader. Failure is an opportunity to learn and grow. When you lose you must focus on improvement not in failure, you must move forward rather than returning to an anchor point (that anyway will not be a safe-haven since you’ll have less money than the amount you started with).

8. Long-Term Focus

Entrepreneurship is about starting a business that can grow as a sustainable venture. When you trade you must not have a short-term perspective because if you do so you’ll become demotivated in a bad month. You must have medium-term profitability goals. Given the yield you get from traditional money applications any return rate higher than 0% in a year should be motivating for you. If you define unrealistic and unattainable goals to start with, you’ll quit after the first month.

This is my interpretation of doing trading for a living. What's yours?