How your business expertise can help you master the financial markets

effective business plan

When you’re new to trading, it’s easy to feel as if you don’t know anything and everybody you’re dealing with is better informed than you. The truth, however, is that you probably have advantages you never even thought about. One of them is your business expertise. If you’ve been working in business for a while, then you’ll have all sorts of soft skills that you can draw on to help you trade successfully. You’ll also have an understanding of how the markets work (even if you don’t recognise it as such), insights in the sectors you’ve worked in, and connections who can help you stay informed as you try to predict market changes. What you need to focus on is how you can apply these.

 Soft skills

Most new traders fail for one of three reasons: they don’t put in the effort to develop their skills and understanding; they don’t do their research; or they fall prey to temptation and lose their money to scams or impulsive decisions. If you have a background in business, then you’ll already have learned the importance of discipline, diligence and careful planning, so you won’t be as vulnerable to making these mistakes. You’ll also be well organised and you’ll understand the importance of good recordkeeping. You’ll have learned to see your failures, still more so than your successes, as learning opportunities, and you won’t give up at the first hurdle.

You’ll also have more specific skills, such as the ability to model developments with lots of moving parts, taking scraps of information from different sources, and mapping out the way they intersect. This really helps when you’re trying to predict market movements. You’ll be able to deal with complex concepts and visualise your best course of action. You’ll also be able to adjust that course as you receive new information.

 Knowledge of the markets

Few people work in business for long without developing some understanding of how the markets work. If you’ve moved money internationally, then you’ll already be familiar with the ups and downs of currency exchange rates and the sort of economic and political factors that can influence them. This is really helpful when you start trading forex, and tips you can find on will help you apply your knowledge in practice. Meanwhile, knowing how company behaviour changes in accordance with wider market forces can help to give you an edge in the stock market. You’ll have an instinctive awareness of the cycles that take place in the markets and you’ll also be familiar with the logic of supply chains, enabling you to see at a glance how developments in one area of business are likely to influence another further down the line.

 Sector-specific knowledge

When you have intimate knowledge of how a particular sector works, you can use that to identify trading opportunities. You’ll be better at spotting companies with potential and at determining where there are gaps in the market that provide them with strong growth potential. If you keep up your knowledge by continuing to read trade publications and spend time with people working in the sector, you’ll have a sense of when it’s about to do well and when it’s likely to start struggling. Although insider trading laws mean that you shouldn’t be trading stocks in companies based on knowledge that isn’t in the public domain, there’s nothing to stop you taking advantage of simply knowing publicly available information in great detail.

In the long term, it’s always advisable to spread your investments across multiple sectors in order to reduce the risks associated with a downturn in any one, but most really successful investors pick one or two to make their main points of focus so that they can understand them in depth.

 Identifying good investments

When you’re considering putting your money into a particular company, you need to know whether or not it’s likely to do well. Here, you can bring all your business skills to bear. You’ll need to assess its current business plan and profit and loss accounts as you would with your own business. You’ll need to analyse the potential of its staff as you might do when hiring. You can even intervene to help companies in which you are already a shareholder by offering advice based on your experience.

Ultimately, there’s no better way to get ahead in trading than by drawing on a strong background in business. You may not have the starting advantage of those who go into trading with inherited wealth, but you’ll be able to do a lot more with what you’ve got.

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