Trading Stocks As A Business – Why And How?

Trading stocks and trading stocks as a business are completely different approaches. Even, it isn’t the same money.

By Guy Avtalyom

Trading stocks as a business depends on your ability to trade different securities. In other words, how much are you ready to trade stocks, bonds, stock options, futures, or precious metals. Trading stocks as a business means you must consistently be profitable. You’ll have to have an income from your profits. In case you have any drops in your investments, that will have a negative influence on your income. There are some things you’ll have to take into consideration before you make any choice on trading stocks as a business.

Increase the capital for trading stocks as a business

First of all, you’ll need to have the amount you must require to start trading stocks as a business. If you don’t have an adequate amount you’re not comfortable in your business. You will not know whether you are right or not. Build a trading fund and open an unconnected, separated bank account for it. You’ll need to secure a fund that is separate from savings. It is a smart decision to protect your and your family’s financial security.

Before start trading stocks as a business

Trading offers a high level of flexibility, also it offers incomparable financial returns. The downside is that it also comes with real financial risks. If you are considering trading stocks as a business, you’ll need to well prepare yourself with the resources and mindset. It is just like any other business. You’ll need a lot of planning and preparation if you want day trading stocks. Trading stocks every day is the way to build trading stocks as a business. 

Stock trading essentially relies on your abilities and skills to trade. In essence, you’re fighting for your personal interest. This type of business requires you to perfectly analyze things. If you do not pay attention to your matter when trade, you’re not doing business, it’s more recreation. Also, you’ll have to be patient in this business. Yes, this is a very profitable business and can lead you towards great wealth. To achieve this, patience is needed. You’ll have to analyze the daily stock changes and sometimes it will take more time to make a profit.

Pay off debt before start trading stocks as a business

Pay off debt as much as possible. If debt lies in your head, you’ll be stressed. Stress in trading stocks for a living isn’t your friend. This kind of pressure can influence your trading decisions. For example, you may seek to get a bit more out of each transaction. Debts can push you to make choices that aren’t in line with your trading criteria. So, the best start in trading stocks as a business is without debts. The wrong decision is to start this business thinking that you’ll profit enough from trading to pay it back. Some people did it but it is very rare. Always keep in mind that business should never be based on assumptions but on the plan.

Trading stocks as a  business from your home can help you gain financial independence.

Choose your trading strategy

Write it down. You can find many trading strategies on the market. The other solution is to create your own trading strategies. Just be conscious to add the criteria and parameters on how you pick stocks. If you know when to buy and when to sell, you’ll know how to create your strategy for trading stocks as a business. That will be your business operating system, nothing else you’ll need.

Buy and sell following your strategies, and be disciplined with your budget limits. You” experience many ups and downs, but never leave or change your original parameters. In other words, you’ll need discipline. Otherwise, you’ll suffer great losses.

Discount trading account

It is recommended to open an online discount trading account. It isn’t hard to find an online brokerage that offers trades with low-cost fees. Connect your trading account to the bank account you already opened for trading. Your discount broker will carry out buy and sell orders at a lower commission rate. Don’t expect investment advice on your behalf. These brokers aren’t full-service types. Most discount brokers work through online platforms and are very accessible.

Of course, you may choose a full-service broker. Your choice will depend on your goals, experience, financial status. Pay attention to how much much you’ll have to pay for commissions. Full-service brokers will take a healthy part out of your investment and trading returns. So, discount brokers could be a better choice.

Do everything like it is a business

For trading stocks as a  business, you’ll need to establish trading budgets, and stick to it. Further, limit your investment in any individual stock. Your budgets should have trading limits per day and week and you’ll have to track it. The best way is to create a spreadsheet. Add to it the date when you bought and sold the stocks, what was the price, how much any of these transactions cost you. Also, use some good and trusty software that will manage all of this information for filing taxes.

How to make money by trading stocks as a business?

More and more people seek a home-based business to boost their income. These jobs offer flexibility and financial freedom. Men and women who have children at home or full-time jobs can trade – it is just a matter of obtaining the right opportunity. Trading from home is a good option for many people who have examined trading stocks as a business. Hence, if you want to start this business from home, it’s important to take time to plan and examine it in more detail.

Keep in mind, it doesn’t matter how experienced you are. You’ll need advice from some experts. Some will do short consultation for free, some will charge you. In any case, that might save you money and your investments. Your full-time job as a trader will demand a proper set up for your trading entity. So, you’ll need experts to help with that to do. Some brokers have packages that contain offers that the average investors don’t have access to. For example, they could offer you operating documents, consultation, bookkeeping, etc.

Trading business from home

To determine if you are in the stocks trading as a business, for the US residents the IRS will consider three factors. First, they will check if you attempt to profit from the daily market changes in the stock prices. Second, the IRS will examine how considerable is your trading activity, and the third criterion is your trading must be continuous and regular. There is no one sure-fire strategy to avoid trading tax law. You must manage your trading as a business. You’ll have to learn how to document your trading time, expenses, and some other things.

Special rules

To be in business as a trader in stocks you must meet some conditions as we mentioned above. If you don’t meet them, your stock trading will not be qualified as a business, you’ll be an investor. The point is that a trader must keep detailed records and make a difference between the stocks owned for investment and the stocks in the trading business.

Can trading stocks be a business?

Trading stocks as a business can certainly be a business. In many cases, you can profit from it. The main thing is to consistently profit from trading. That isn’t easy. Even if you think you’ll do it well, there is a chance to fail if you don’t have a realistic plan, both for your trade and your business. The plan isn’t just to make money, it’s more a consequence. It has to be your goal. But how to make money, the ways you’ll do it, the strategy you’ll use, a trading plan that shows how much money you plan to earn per day, week or month, could be a plan. 

Your trading stocks as a business depends on the business plan and trading plan both. All you have to do is to develop and execute both.

The goal of full-time stock trading 

First of all, take it very seriously. Trading stocks as a business isn’t a hobby. If you want to enter the stock trading as a business that means you’re going to trade for a living. So, you have to treat it as you own the company. In every business education is important, so you’ll need to understand the whole industry. You have to know how it works, you can’t judge based on several trades you made. Like it is important for any business, you’ll need tools and you’ll need to know how to use them. Otherwise, tools will be useless. Also, you’ll need a bit more advanced computer. Nothing fancy, but something that can handle the demands of a trading stocks business. You’ll also need charts, scanners, and lots of data that you cannot wait or get delayed. It’s all up to you, you can set your business up for bankruptcy. But it isn’t a goal. The goal is to consistently make a profit and to live comfortably.

Bottom line

Be reasonable. What do you really think about stock trading? Is it a business for you? If it is just a hobby, it’s okay, but don’t call it a business. Further, think about your strategy. Do you set your trades randomly? What causes you to make a particular trade? What tools do you hold in your trading toolbox?
If you struggle with emotions, the right solution is to learn how to read charts. Of course, you’ll need to know technical analysis. Trading stocks as a business is possible if you’re honest with yourself and have the answers to all these questions.