Saturday, May 16, 2015

Going From Managing to Leading Your Trading Business

There are few topics more important than that of self-leadership: how we guide and manage our lives.  This is particularly true when the business of life also includes a business as a trader or investor.  Managing our trading means that we are deploying our capital efficiently and effectively:  finding the right balance of risk and reward over time.  Leading our trading business is something different altogether.  When we are the leader of our trading enterprise, we determine whether we are pursuing the right risks and rewards.  Markets change; opportunity sets change:  do we change with them?  That is a question of leadership.

A major pitfall for active traders is that they spend so much time managing risk and opportunity that they fail to properly lead.  They work hard, but struggle to succeed if they're pursuing unfruitful directions.

But if you're an investor or trader, you're more than a manager and more than a leader.  You are also a venture capitalist.  You are funding your trading enterprise.

Here's a great exercise:

Put together a pitchbook proposal as if you're actually pursuing venture capital.  Your pitchbook will consist of four sections:

1)  Your background, history, and experience that qualify you for an investment of capital;
2)  Your core strategy or strategies and what, specifically, gives them a distinctive edge in markets;
3)  Your track record, including monthly profit/loss, drawdowns, and overall risk-adjusted returns;
4)  A detailed description of your trading process, from the generation of ideas to the management of risk, along with sample trades that illustrate the process in action.

Once you assemble the pitchbook, set it aside for a day or two and then read it with a fresh set of eyes, imagining that you're an investor being asked to invest in this trading business.

Would you make an investment?  Would you feel comfortable asking others to read your pitchbook and consider making an investment?  Would a savvy trader or investor invest in your business?

If not, what improvements and changes would you need to implement to justify an investment?

The answer to that question takes you from management to leadership.

Further Reading:  Self-Leadership and Success