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Trading Business Plan

Published Mar.29, 2024

Updated May.04, 2024

By: Alex Silensky

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Table of Content

According to a report, 13% of day traders maintain consistent profitability over six months, and a mere 1% succeed over five years. This is primarily due to inadequate planning and undercapitalization. A well-crafted trading business plan can help you avoid these pitfalls, and this article will guide you.

In this article, you’ll learn:

• The current trends and growth forecasts in the stock trading industry
• A breakdown of the costs involved in starting a trading company
• The key components of a trading business plan (with a trading business plan example)
• Strategies for securing funding and overcoming the barriers to entry

By the end of this article, you’ll understand what it takes to create a business plan for an investment company , positioning your trading business for long-term success in this lucrative but highly competitive industry.

Pros and Cons of Trading Company

Let’s explore the pros and cons associated with running a trading company before diving into the specifics of a trading site business plan. Understanding them will help you make informed decisions:

• Potential for significant profits.
• Flexibility in terms of time and location.
• Opportunity for continuous learning and skill development.
• High risk due to market volatility.
• Emotional stress and psychological pressure.
• Requirement for constant vigilance and discipline.

Trading Industry Trends

Industry size and growth forecast.

According to a report , the global stock trading and investing applications market size was at around $37.27 billion in 2022 and projects to grow at a CAGR of 18.3% from 2023 to 2030 (Source: Grand View Research). The following factors drive this growth:

• Increasing internet penetration
• Rising disposable income
• Growing awareness of investment opportunities.

(Image Source: Grand View Research)

The Services

As per our private equity firm business plan , a stock trading business offers various services, including:

• Facilitating Trades on behalf of clients
• Algorithmic trading services to automatically execute trades
• Market Insights (research reports, market analysis, and economic forecasts)
• Technical and Fundamental Analysis (price charts, historical data, and company fundamentals)
• Investment Recommendations
• Seminars and Webinars
• Online Courses
• Demo Accounts
• Portfolio Diversification
• Stop-Loss Orders
• Hedging Strategies
• Direct Market Access (DMA)
• Global Market Access
• Trading Platforms
• Mobile Apps
• High-Frequency Trading (HFT)
• Legal and Compliance Services
• Educate clients about Risk Disclosure

How Much Does It Cost to Start a Trading Company

According to Starter Story, you can expect to spend an average of $12,272 for a stock trading business. Some key startup costs include:

How Much Can You Earn from a Trading Business?

Earnings in the trading business can vary significantly and depend heavily on:

• Trading strategy and approach
• Market conditions and volatility
• Risk management techniques
• Capital allocation and leverage

While specific income figures are difficult to predict due to these factors. However, here are some statistics showing the earning potential of a stock trading business:

• According to Investopedia, only around 5% to 20% of day traders consistently make money.
• According to Indeed Salaries, the average base salary for a stock trader in the U.S. is $80,086 per year.
• 72% of day traders ended the year with financial losses, according to FINRA.
• Among proprietary traders, only 16% were profitable, with just 3% earning over $50,000. (Source: Quantified Strategies)

What Barriers to Entry Are There to Start a Trading Company

Barriers to entry into the stock trading business include:

• Regulatory Requirements: Obtaining necessary licenses and registrations from governing bodies like the SEC and FINRA is a complex and time-consuming process.
• Capital Requirements: Trading activities require significant capital to manage risks and leverage opportunities, which can be a substantial challenge for new or small firms.
• Technological Expertise: Developing or acquiring sophisticated trading platforms, algorithms, and data analysis tools is costly and requires specialized expertise.
• Market Knowledge and Experience: Gaining in-depth knowledge and practical experience in the complex and dynamic financial markets takes years of dedicated study.
• Competitive Landscape: Breaking into the highly competitive trading industry dominated by established firms and well-funded proprietary trading desks is challenging for new entrants.

You can overcome these barriers by developing unique strategies, leveraging innovative technologies, and offering competitive and specialized services to differentiate yourself in the market. Do check our financial advisor business plan to learn more.

Creating a Trading Business Plan

A well-researched stock trading business plan is crucial to start a trading business. A general trading company business plan is a comprehensive document that defines your goals, strategies, and the steps needed to achieve them. It helps you stay organized and focused and increases your chances of securing funding if you plan to seek investors or loans.

Steps to Write a Trading Business Plan

You can use a business plan template for a trading company or follow these steps to prepare a business plan for a personal trading business:

Step 1: Define Your Goals and Investment Objectives

Step 2: Conduct Market Research

Step 3: Develop Your Trading Strategy

Step 4: Establish Your Business Structure

Step 5: Develop a Financial Plan

Step 6: Outline Your Operational Procedures

Step 7: Create a Marketing and Growth Strategy

Step 8: Implement Risk Management

Step 9: Create an Exit Strategy

What to Include in Your Trading Business Plan

Executive summary, company overview.

• Market Analysis
• Trading Strategy and Risk Management
• Operations and Technology
• Financial Projections
• Management and Organization
• Appendices (e.g., research, charts, legal documents)

Here’s an online trading business plan sample of ABC Trading:

ABC Trading, a recently established stock trading firm, provides online trading services to individuals and institutional investors. Key highlights of our business include:

• Vision – Becoming a leading online trading platform with a wide range of trading products and services.
• Values – Our core focus is innovation, excellence, integrity, and customer satisfaction.
• Target market – Tech-savvy and risk-tolerant investors looking for alternative ways to invest their money and diversify their portfolios.
• Revenue model – Commissions and fees for each trade, as well as subscription fees for premium features and services.
• Financial goal – Break even in the second year of operation and generate a net profit of $1.2 million in the third year.

ABC Trading is seeking $500,000 seed funding to launch its platform, acquire customers, and expand its team.

Company Name: ABC Trading

Founding Date: January 2024

Location: Delaware, USA

Registration: Limited Liability Company (LLC) in the state of New York

Regulated By: Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA)

Our team comprises seasoned professionals with diverse finance, mathematics, computer science, and engineering backgrounds.

Marketing Plan

Marketing Strategy: We aim to leverage online channels, such as social media, blogs, podcasts, webinars, and email newsletters, to create awareness, generate leads, and convert prospects into customers.

Marketing Objectives:

• Reach 100,000 potential customers in the first year of operation
• Achieve a 10% conversion rate from leads to customers
• Retain 80% of customers in the first year and increase customer lifetime value by 20% in the second year

The customer profile of ABC Trading includes the following characteristics:

• Age: 25-65 years old
• Gender: Male and female
• Income: Above $100,000 per year
• Education: Bachelor’s degree or higher
• Occupation: Professionals, entrepreneurs, executives, or retirees
• Location: US or international
• Trading experience: Intermediate to advanced
• Trading goals: Income generation, capital appreciation, risk diversification, or portfolio optimization
• Trading preferences: Stocks, options, or both
• Trading style: Technical, trend following, or volatility trading
• Trading frequency: Daily, weekly, or monthly
• Trading risk: Low, medium, or high

Marketing Tactics:

• Create and distribute engaging and informative content on social media platforms
• Offer free trials, discounts, referrals, and loyalty programs
• Collect and analyze customer feedback and data to improve and personalize the customer experience
• Partner with influencers, experts, and media outlets in the trading and finance niche

Marketing Budget:

We will allocate $10,000 for our marketing campaign, which we will use for the following purposes:

Operations Plan

ABC Trading’s operations plan ensures the smooth and efficient functioning of the company’s platform and services and compliance with the relevant laws and regulations.

Operation Objectives:

• Maintain a 99% uptime and availability of the company’s platform and services
• Ensure the security and privacy of the company’s and customers’ data and funds
• Provide timely and professional customer support and service

Operation Tactics:

• Use cloud-based servers and services
• Implement encryption, authentication, and backup systems
• Hire and train qualified and experienced customer service representatives and technicians
• Monitor and update the company’s platform and services regularly
• Follow the best practices and standards of the industry and adhere to the applicable laws and regulations

Operation Standards:

Financial Plan

ABC Trading’s financial plan is to provide a realistic and detailed projection of the company’s income, expenses, and cash flow for the next three years, as well as the key financial indicators and assumptions that support the projection.

Financial Objectives:

• Achieve a positive cash flow in the second year of operation.
• Reach a break-even point in the second year of operation.
• Generate a net profit of $1.2 million in the third year of operation.
• Maintain a healthy financial ratio of current assets to current liabilities of at least 2:1.

Financial Assumptions:

• Launch its platform and services in the first quarter of 2024
• Acquire 10,000 customers in the first year, 20,000 customers in the second year, and 30,000 customers in the third year
• Average revenue per customer will be $50 per month, based on the average number and size of trades and the subscription fees
• Average operating expense per customer will be $10 per month, based on the average cost of salaries, rent, utilities, marketing, and legal fees
• Pay a 25% tax rate on its net income
• Reinvest 50% of its net income into the company’s growth and development

Projected Income Statement:

Projected Cash Flow Statement

Projected Balance Sheet

Fund a Trading Company

To successfully establish and operate a trading company, raising funds to finance daily operations and business expansion is crucial. There are different ways with their advantages and disadvantages:

1. Self-funding (Bootstrapping)

Self-funding, also known as bootstrapping, is when the founder or owner of the trading company uses their own personal savings, family business ideas , assets, or income to finance the business. This is the most common and simplest way to fund a trading company, especially in the early stages.

• Complete ownership and control
• Flexibility in decision-making
• Potential for higher long-term returns
• Limited access to capital
• Personal financial risk
• Slower growth potential

2. Debt Financing

Debt financing involves borrowing money from lenders, such as banks, credit unions, or microfinance institutions, to fund the trading company’s operations. The borrowed funds must be repaid with interest over a specified period.

• Retain ownership and control
• Potential tax benefits from interest deductions
• Disciplined approach due to repayment obligations
• Debt burden and interest payments
• Collateral requirements and personal guarantees
• Difficulty in securing financing for startups

3. Angel Investors

Angel investors are wealthy individuals who invest their own money into early-stage or high-potential trading companies in exchange for equity or convertible debt. Angel investors typically provide smaller funding than venture capitalists and offer mentorship, guidance, and access to their network.

• Access to capital and industry expertise
• Potential for additional mentorship and guidance
• Lower risk compared to traditional investors
• Dilution of ownership and control
• Potential for conflicting visions and expectations
• Limited resources compared to larger investors

4. Venture Capital (VC) Funding

Venture capital firms are professional investment firms that provide capital to high-growth startups in exchange for equity ownership. They typically invest large sums of money and are active in the company’s management and strategic direction.

• Access to substantial capital for growth
• Expertise and industry connections from the VC firm
• Validation and credibility for the business
• Significant dilution of ownership and control
• Intense pressure for rapid growth and return on investment

Depending on your business model, goals, and needs, you may also consider other options, such as grants, subsidies, partnerships, etc. Ensure to check for relevant documents, like the hedge fund private placement memorandum . The best way to fund your trading company is the one that suits your situation and preferences.

OGSCapital: Your Strategic Partner for Business Success

At OGSCapital, we specialize in professional business plans that empower startups, established companies, and visionary entrepreneurs. With over 15 years of experience, our seasoned team combines financial acumen, industry insights, and strategic thinking to craft comprehensive plans tailored to your unique vision. Whether you’re seeking funding, launching a new venture, or optimizing your existing business, we’ve got you covered.

If you have any further questions regarding how to write a business plan for your trading business, feel free to contact us. Our team at OGSCapital is here to support you on your entrepreneurial journey. You can also check our hedge fund business plan sample here.

Download Trading Business Plan Template in PDF

Frequently Asked Questions

What does a trading business include?

A trading business involves trading stocks and other financial instruments under a legal business structure. It includes:

• Market analysis
• Trading strategy
• Risk management

How does a trading company work?

A stock trading company facilitates the buying and selling of stocks (shares) on behalf of investors. These companies operate within stock exchanges, executing trades based on specific trading strategies.

OGSCapital’s team has assisted thousands of entrepreneurs with top-rate business plan development, consultancy and analysis. They’ve helped thousands of SME owners secure more than $1.5 billion in funding, and they can do the same for you.

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Trading Business Plan Template

Written by Dave Lavinsky

Trading Business Plan

Over the past 20+ years, we have helped over 500 entrepreneurs and business owners create business plans to start and grow their trading companies.

If you’re unfamiliar with creating a trading business plan, you may think creating one will be a time-consuming and frustrating process. For most entrepreneurs it is, but for you, it won’t be since we’re here to help. We have the experience, resources, and knowledge to help you create a great plan.

In this article, you will learn some background information on why business planning is important. Then, you will learn how to write a trading business plan step-by-step so you can create your plan today.

Download our Ultimate Business Plan Template here >

What is a Trading Business Plan?

A business plan provides a snapshot of your trading company as it stands today, and lays out your growth plan for the next five years. It explains your business goals and your strategies for reaching them. It also includes market research to support your plans.

Why You Need a Business Plan for a Trading Company

If you’re looking to start a trading company or grow your existing company, you need a business plan. A business plan will help you raise funding, if needed, and plan out the growth of your trading business to improve your chances of success. Your business plan is a living document that should be updated annually as your company grows and changes.

Sources of Funding for Trading Companies

With regards to funding, the main sources of funding for a trading company are personal savings, credit cards, bank loans, and angel investors. When it comes to bank loans, banks will want to review your plan and gain confidence that you will be able to repay your loan and interest. To acquire this confidence, the loan officer will not only want to ensure that your financials are reasonable, but they will also want to see a professional plan. Such a plan will give them the confidence that you can successfully and professionally operate a business. Personal savings and bank loans are the most common funding paths for trading companies.

Finish Your Business Plan Today!

How to write a business plan for a trading company.

If you want to start a trading business or expand your current one, you need a business plan. The guide below details the necessary information for how to write each essential component of your trading business plan.

Executive Summary

Your executive summary provides an introduction to your trading business plan, but it is normally the last section you write because it provides a summary of each key section of your plan.

The goal of your executive summary is to quickly engage the reader. Explain to them the kind of trading company you are running and the status. For example, are you a startup, do you have a trading business that you would like to grow, or are you operating a chain of trading companies?

Next, provide an overview of each of the subsequent sections of your plan.

• Give a brief overview of the trading industry.
• Discuss the type of trading business you are operating.
• Detail your direct competitors. Give an overview of your target customers.
• Provide a snapshot of your marketing strategy. Identify the key members of your team.
• Offer an overview of your financial plan.

Company Overview

In your company overview, you will detail what type of trading business you are operating.

For example, you might specialize in one of the following types of trading businesses:

• Retail trading business: This type of business sells merchandise directly to consumers.
• Wholesale trading business: This type of business sells merchandise to other businesses.
• General merchandise trading business: This type of business sells a wide variety of products.
• Specialized trading business: This type of business sells one specific type of product.

In addition to explaining the type of trading business you will operate, the company overview needs to provide background on the business.

Include answers to questions such as:

• When and why did you start the business?
• What milestones have you achieved to date? Milestones could include the number of customers served, the number of products sold, and reaching $X amount in revenue, etc.
• Your legal business Are you incorporated as an S-Corp? An LLC? A sole proprietorship? Explain your legal structure here.

Industry Analysis

In your industry or market analysis, you need to provide an overview of the trading industry.

While this may seem unnecessary, it serves multiple purposes.

First, researching the trading industry educates you. It helps you understand the market in which you are operating.

Secondly, market research can improve your marketing strategy, particularly if your analysis identifies market trends.

The third reason is to prove to readers that you are an expert in your industry. By conducting the research and presenting it in your plan, you achieve just that.

The following questions should be answered in the industry analysis section:

• How big is the trading industry (in dollars)?
• Is the market declining or increasing?
• Who are the key competitors in the market?
• Who are the key suppliers in the market?
• What trends are affecting the industry?
• What is the industry’s growth forecast over the next 5 – 10 years?
• What is the relevant market size? That is, how big is the potential target market for your trading business? You can extrapolate such a figure by assessing the size of the market in the entire country and then applying that figure to your local population.

Customer Analysis

The customer analysis section must detail the customers you serve and/or expect to serve.

The following are examples of customer segments: individuals, schools, families, and corporations.

As you can imagine, the customer segment(s) you choose will have a great impact on the type of trading business you operate. Clearly, individuals would respond to different marketing promotions than corporations, for example.

Try to break out your target customers in terms of their demographic and psychographic profiles. With regards to demographics, including a discussion of the ages, genders, locations, and income levels of the potential customers you seek to serve.

Psychographic profiles explain the wants and needs of your target customers. The more you can recognize and define these needs, the better you will do in attracting and retaining your customers.

Finish Your Trading Business Plan in 1 Day!

Don’t you wish there was a faster, easier way to finish your business plan?

With Growthink’s Ultimate Business Plan Template you can finish your plan in just 8 hours or less!

Competitive Analysis

Your competitive analysis should identify the indirect and direct competitors your business faces and then focus on the latter.

Direct competitors are other trading businesses.

Indirect competitors are other options that customers have to purchase from that aren’t directly competing with your product or service. This includes other types of retailers or wholesalers, re-sellers, and dropshippers. You need to mention such competition as well.

For each such competitor, provide an overview of their business and document their strengths and weaknesses. Unless you once worked at your competitors’ businesses, it will be impossible to know everything about them. But you should be able to find out key things about them such as

• What types of customers do they serve?
• What type of trading business are they?
• What is their pricing (premium, low, etc.)?
• What are they good at?
• What are their weaknesses?

With regards to the last two questions, think about your answers from the customers’ perspective. And don’t be afraid to ask your competitors’ customers what they like most and least about them.

The final part of your competitive analysis section is to document your areas of competitive advantage. For example:

• Will you make it easier for customers to acquire your product or service?
• Will you offer products or services that your competition doesn’t?
• Will you provide better customer service?
• Will you offer better pricing?

Think about ways you will outperform your competition and document them in this section of your plan.  

Marketing Plan

Traditionally, a marketing plan includes the four P’s: Product, Price, Place, and Promotion. For a trading company, your marketing strategy should include the following:

Product : In the product section, you should reiterate the type of trading company that you documented in your company overview. Then, detail the specific products or services you will be offering. For example, will you sell jewelry, clothing, or household goods?

Price : Document the prices you will offer and how they compare to your competitors. Essentially in the product and price sub-sections of your plan, you are presenting the products and/or services you offer and their prices.

Place : Place refers to the site of your trading company. Document where your company is situated and mention how the site will impact your success. For example, is your trading business located in a busy retail district, a business district, a standalone facility, or purely online? Discuss how your site might be the ideal location for your customers.

Promotions : The final part of your trading marketing plan is where you will document how you will drive potential customers to your location(s). The following are some promotional methods you might consider:

• Advertise in local papers, radio stations and/or magazines
• Reach out to websites
• Distribute flyers
• Engage in email marketing
• Advertise on social media platforms
• Improve the SEO (search engine optimization) on your website for targeted keywords

Operations Plan

While the earlier sections of your plan explained your goals, your operations plan describes how you will meet them. Your operations plan should have two distinct sections as follows.

Everyday short-term processes include all of the tasks involved in running your trading business, including answering calls, scheduling shipments, ordering inventory, and collecting payments, etc.

Long-term goals are the milestones you hope to achieve. These could include the dates when you expect to acquire your Xth customer, or when you hope to reach $X in revenue. It could also be when you expect to expand your trading business to a new city.  

Management Team

To demonstrate your trading business’ potential to succeed, a strong management team is essential. Highlight your key players’ backgrounds, emphasizing those skills and experiences that prove their ability to grow a company.

Ideally, you and/or your team members have direct experience in managing trading businesses. If so, highlight this experience and expertise. But also highlight any experience that you think will help your business succeed.

If your team is lacking, consider assembling an advisory board. An advisory board would include 2 to 8 individuals who would act as mentors to your business. They would help answer questions and provide strategic guidance. If needed, look for advisory board members with experience in managing a trading business.  

Financial Plan

Your financial plan should include your 5-year financial statement broken out both monthly or quarterly for the first year and then annually. Your financial statements include your income statement, balance sheet, and cash flow statements.  

Income Statement

An income statement is more commonly called a Profit and Loss statement or P&L. It shows your revenue and then subtracts your costs to show whether you turned a profit or not.

In developing your income statement, you need to devise assumptions. For example, will you charge per item or per pound and will you offer discounts for bulk orders? And will sales grow by 2% or 10% per year? As you can imagine, your choice of assumptions will greatly impact the financial forecasts for your business. As much as possible, conduct research to try to root your assumptions in reality.  

Balance Sheets

Balance sheets show your assets and liabilities. While balance sheets can include much information, try to simplify them to the key items you need to know about. For instance, if you spend $50,000 on building out your trading business, this will not give you immediate profits. Rather it is an asset that will hopefully help you generate profits for years to come. Likewise, if a lender writes you a check for $50,000, you don’t need to pay it back immediately. Rather, that is a liability you will pay back over time.  

Cash Flow Statement

Your cash flow statement will help determine how much money you need to start or grow your business, and ensure you never run out of money. What most entrepreneurs and traders don’t realize is that you can turn a profit but run out of money and go bankrupt.

When creating your Income Statement and Balance Sheets be sure to include several of the key costs needed in starting or growing a trading business:

• Cost of equipment and supplies
• Payroll or salaries paid to staff
• Business insurance
• Other start-up expenses (if you’re a new business) like legal expenses, permits, computer software, and equipment

Attach your full financial projections in the appendix of your plan along with any supporting documents that make your plan more compelling. For example, you might include your facility location lease or a list of your suppliers.  

Writing a business plan for your trading business is a worthwhile endeavor. If you follow the template above, by the time you are done, you will truly be an expert. You will understand the trading industry, your competition, and your customers. You will develop a marketing strategy and will understand what it takes to launch and grow a successful trading business.  

Trading Business Plan Template FAQs

What is the easiest way to complete my trading business plan.

Growthink's Ultimate Business Plan Template allows you to quickly and easily write your trading business plan.

How Do You Start a Trading Business?

Starting a trading business is easy with these 14 steps:

• Choose the Name for Your Trading Business
• Create Your Trading Business Plan (use a trading business plan template or a forex trading plan template)
• Choose the Legal Structure for Your Trading Business
• Secure Startup Funding for Trading Business (If Needed)
• Secure a Location for Your Business
• Register Your Trading Business with the IRS
• Open a Business Bank Account
• Get a Business Credit Card
• Get the Required Business Licenses and Permits
• Get Business Insurance for Your Trading Business
• Buy or Lease the Right Trading Business Equipment
• Develop Your Trading Business Marketing Materials
• Purchase and Setup the Software Needed to Run Your Trading Business
• Open for Business

What is a Trading Business?

There are several types of trading businesses:

• Retail trading business- sells merchandise directly to consumers
• Wholesale trading business- sells merchandise to other businesses
• General merchandise trading business- sells a wide variety of products
• Specialized trading business- sells one specific type of product

Don’t you wish there was a faster, easier way to finish your Trading business plan?

OR, Let Us Develop Your Plan For You

Since 1999, Growthink has developed business plans for thousands of companies who have gone on to achieve tremendous success.   Click here to see how Growthink’s business plan advisors can give you a winning business plan.

Other Helpful Business Plan Articles & Templates

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Setup a Trading Business: The Complete Guide

By Leo Smigel

Updated on October 13, 2023

Trading as a business involves trading stocks and other financial instruments under a legal business structure, such as a sole proprietor, partnership, or limited liability company (LLC).

Everyone wants to make money, and everyone wants to be free.

You can accomplish both if you’re a successful trader.

And you’re in luck because there’s one thing I know how to do exceptionally well – it’s trading as a business.

You might say, Leo, I don’t need to start a trading business – I’m a new trader. Well then, I’ve got a question: How many successful companies do you think started without a plan? Sure, there are some, but I would bet those with a sound plan faired better over the long run.

And trading is no different. Trading is most successful when it’s done most businesslike.

And for those who are already profitable and ready to go full-time, I’ve got some massive tax-saving tips for you, so stay tuned.

I’ve also sprinkled secrets about becoming a full-time trader that you’ll be hard-pressed to find elsewhere.

I will explain everything you need to know step by step and show you how to become a professional trader running your own successful trading company, whether you’re incorporated.

Before You Can Start Trading

Before creating any business, you need to start with a solid plan and understand where you fit in the market.

But before we jump into the nitty-gritty details of running your trading business, you need to answer five show-stopping questions.

1. What Is Your Why?

Why do you want to be a trader? Many traders start trading because they want to get rich.

Now, it’s possible to become rich trading; however, understand that if you’re not a profitable trader already, the chances of success are slim.

Most studies say that only 5% of traders become profitable. And according to the Small Business Association, this is in stark contrast to starting a business where 33% are still around after year ten.

In other words, if it’s money you’re after, it’s much easier to create an online business than to become a profitable trader.

And no matter how smart you are, trading will slap you around until you’re begging to quit.

You need more than the pursuit of money to keep you in this game.

You need an unwavering passion to play, and you need an advantage.

2. What’s Your Trading Edge?

A trading edge is an observation or approach that creates an advantage over the rest of the market players. Anything that can add a few points to the winning side of the equation builds an edge in your favor.

Most traders lose money in the financial markets because they lack an edge.

I’m also going to say something controversial here:

Risk management isn’t an edge – it’s just good trading – and I can prove it.

Let’s play the coin toss game. If you guess correctly, you get a dollar and lose a dollar if you don’t. You can play this game all day long and cut your losses short, but you’re never going to make a million dollars.

Why? Because you have no edge. The probabilities are not stacked in your favor.

You need an edge to make it full-time, and you need multiple to make it a career.

You need to be the casino – you need to have multiple edges that compound over time. Don’t be a gambler with the odds stacked against you.

So how do you find an edge?

Most edges come from a better understanding of market structure, faster execution speed, or better data and analysis.

For example, a market structure edge may be an exceptional ability to exploit the post-earnings announcement drift (PEAD) anomaly. Another may be the early identification of trends through sophisticated technical or data analysis.

You want to ensure you are on the right side of the stock market as much as you can.

And if you’re struggling to find an edge, I’ve got you covered.

I backtested Scot1and’s slingshot trading strategy at a high level to verify if it has an edge – which it does. If you’re not familiar with Scot1and, he’s a professional trader. He shares his trades publicly on Twitter and has multiple triple-digit years under his belt, with his highest being 305% and last year (2021) being 150%.

Scot1and wanted to find a way to get into solid stocks before the runup and invented the slingshot trading setup. That’s one of his many edges. And this setup can work for you, too, assuming it meshes with your market philosophy and psychological makeup – but more on that later.

Once you have successfully identified and defined your edge, or better yet, edges, it’s time to consider your risk tolerance.

3. What’s Your Risk Tolerance?

Risk tolerance refers to the degree of risk you’re able to take. And while there are multiple ways to define risk, we’ll consider volatility and drawdown for our purpose.

Since your comfort level with uncertainty determines risk tolerance, it can be challenging to be aware of your risk appetite until faced with a potential loss.

You should strive to gain a clear understanding of your risk appetite and your ability to stomach large swings in the value of your portfolio.

When traders trade above their risk tolerance levels, at best, they’ll lose sleep and make suboptimal decisions the next day, and at worst, they’ll sell out at the exact wrong time.

Risk tolerance is all about understanding yourself – a key characteristic you should possess as a flourishing trading business owner.

And let me tell you when you start a trading business, and it becomes your primary source of income, your risk appetite will change a lot – even for algorithmic traders.

Most traders’ greatest struggle in establishing a profitable trading business revolves around trading psychology.

Finding edges in the market isn’t difficult. I just showed you the slingshot strategy, which is a potential edge that you can incorporate into your trading.

What’s hard isn’t knowing what you should do; it’s doing what you should do – it’s trading like a business.

And risk tolerance is just one aspect of trading psychology.

Psychology And Trading

Trading psychology refers to the emotional aspects of an investor or trader’s decision-making process – it’s how emotions affect your trading, and trading affects your emotions.

There are some important considerations to make here.

Most traders fall into thinking they can achieve trading success with little thought of their psychological makeup.

Successfully aligning your trading strategy with your psychology implies you may need to give up on or change some of your values and beliefs.

For instance, do you value your need to be “right”?.

A trader who values being “right” is more likely to refuse to set a stop and take a slight percentage loss in case the trade goes haywire.

Do overnight moves keep you up at night?

Then perhaps day trading is a better style for you.

You need to find a trading style that suits your trading psychology and addresses your strengths and weaknesses.

This doesn’t mean a risk-averse person can’t adopt a swing-trading style. It also doesn’t mean that if you value being right, you’re perpetually wrong when following your stops.

It just means that traders need to understand why they’re embracing a trading approach and have safeguards against their deficiencies – often, you can flip a weakness on its head.

For example, let’s go back to someone struggling to stop out.

The first issue might be that they do not understand what they’re trading and why they’re trading it. If they’re trading specific mean reversion scenarios, they shouldn’t be using stops – position sizing is the key to risk management; however, let’s assume that the trader was a long-only swing trader.

If they’re a breakout trader not following their stops, likely, they don’t have a deep understanding of what a breakout is and how they work.

Now I could spend hours discussing breakouts, but for now, let’s understand two things:

• Roughly 70% of breakouts fail.
• Successful breakouts rarely retrace to the low of the day.

With this market knowledge, this trader that has to be right now understands that her win percentage should be between 25-35% and where to place their stop. Additionally, their understanding aligns with their market understanding allowing her to be correct and less likely to pull the cord on the stop.

I find deep understanding solves most trading psychology challenges – but just because you’ve got your edge and your psychology in order doesn’t mean you can trade like a business just yet.

4. What Are Your Return Assumptions?

Return assumptions refer to the returns a trader or investor expects to make from a particular investment or their trading activities via their trading efforts in the financial markets.

All active traders share one common goal: to utilize their trading capital to make as much money as possible while assuming a certain level of risk.

For that reason, it’s critical to set your expectations right and figure out a rough idea of what kind of return you might achieve before you kick off your trading endeavors.

So, how do you determine a reasonable rate of return?

Whether you’re a business or a trader, the answer is the same.

Look at you and your competition’s average annual returns per each different system or setup, and determine a number you think you can realistically achieve.

Target Compound Annual Growth Rate (CAGR)

This average annual return is the target compound annual growth rate or CAGR. It’s the average return or profit you make divided by your capital.

To keep the math easy, if you make $10,000 on a $100,000 account, your annual return is 10%.

You need to calculate an appropriate CAGR accurately as it flows through to all of your other business calculations, like how much money your trading business needs to generate each year to cover its expenses.

Without history to back it up, investors shouldn’t set their target CAGR above 15%, and traders shouldn’t set their CAGR above 40%.

And yes, good traders have the potential to compound their capital faster than investors due to the structural advantages of having less money to move.

Here are the top ten filers by 10-year annualized performance to give you context.

Now, I know for some of you, these CAGR numbers are tiny, but exceptional returns are the exception, not the rule.

Minimum Absolute Return

Understanding what you can likely achieve makes it time to figure out precisely what you need to succeed.

The absolute minimum return refers to the minimum return that a trader sets over a predetermined time frame.

This return needs to cover your business expenses, which I’ll cover shortly, and the owner’s draw. The draw is the salary you need for yourself and your dependent’s living expenses.

The minimum absolute return is typically your breakeven level. It’s not the target.

Target Absolute Return

The target is your target absolute return. This is the profit you want your trading business to create over the period, typically a year.

You calculate your target absolute profit target by multiplying your target CAGR by starting capital and subtracting fees, which we’ll cover shortly.

I would advise against creating a profit target and working backward since you may need to inflate your CAGR artificially.

The last thing you want to do is overestimate your trading income and underestimate your trading loss.

Maximum Drawdown

Maximum drawdown refers to your maximum downside risk over a period. It’s the maximum observed loss from a peak to a trough.

For instance, if your portfolio value is $100,000 and you lose $30,000, your drawdown would be ($30,000 – $100,000) / $100,000 = 30% or $30,000 in dollar terms.

It’s important to note that maximum drawdown only measures the extent of the most considerable loss, excluding the frequency of significant losses.

Maximum drawdown determines how much capital you’ll need to start your trading business, assuming you’ve included multiple market cycles in your analysis.

Capital Required

Armed with an understanding of your absolute minimum return and maximum drawdown, we can finally determine how much capital you’ll need to start your trading business.

Capital required refers to the amount of money a trader needs to carry out trading activities within the financial markets.

Consider your capital as the raw material that powers your trading activity in the stock market or any business.

So let’s go through the math.

If you need to generate $50,000 per year and expect your minimum CAGR to be 10%, you would need $50,000 / 10% = $500,000 without a drawdown.

Keep in mind if your CAGR return is that low, it’s likely you don’t possess enough of an edge, but I kept the numbers simple for explanation purposes!

But that’s not all. If your maximum drawdown is 20% or $200,000, you’ll also need to add that to your initial capital.

And with all businesses, you’ll need to put in a considerable amount of time.

5. Time Commitment

Time commitment refers to the number of hours per week applied to your new trading business.

It’s essential to treat and act “businesslike” at all times.

Only by approaching each trading day with full intent and purpose can you aspire to succeed.

This extends beyond just executing your trading strategies.

It also includes learning, studying, researching new strategies, and improving your mindset as a trader.

Can you fit it all into your schedule? Do you have enough time to make it work?

These are critical questions to ask yourself before starting your trading startup.

Let’s think about this a little more.

Understanding A Trading Business

Although different from the traditional brick-and-mortar business, a trading business’s anatomy can be broken down similarly.

Think of your trading strategies as your new products and services.

Through these strategies, you’ll be generating your trading income.

And just like how traditional businesses need to constantly improve their products and services based on customer and market feedback, you’ll be doing the same, which leads me to my next point…

Trading Losses Are Expenses

Trading losses are going to be inevitable. You want to take advantage of this market feedback to improve your product. Be sure to analyze each loss and learn from them. They will be your best teacher.

But at the same time, you simply want to treat your losses as a cost of doing business.

Think of the casino business and a game of roulette.

Of course, the casino makes money when the player loses.

But does the player always lose?

So, if we have a player who is always betting on the color red, they have an almost 50-50 chance of winning each time.

There will be times when the player hits lots of reds in the short-run, and the casino loses money.

However, the house always wins.

In the long run, given that the roulette contains a neutrally colored zero, the casino has the edge (remember, we spoke about the edge earlier).

Act like a casino; if you have an edge in the financial markets, you will win long-term.

Short-term losses are simply the cost of conducting business.

Capital Preservation

But continued losses should signal to the management team that it’s time to rethink the plans.

Intelligent management knows preserving your capital to live another day is more important than making more money in the short term.

New traders often have this backward.

The truth is that the only aspect of the trading process you have significant control over is how much money you will lose in a trade.

It’s critical to size your bets correctly.

And speaking of plans, let’s go over what your trading business plan should include.

Your Trading Business Plan

A trading business plan, similar to a typical business plan, is a document that details everything that you need to know to run your trading business. It includes your objectives, how you intend to make money, your edge, what you will trade and why, and how you will grow your business.

It’s time to address the actual birth of your business as a new independent trader.

What Is Your Company’s Mission Statement?

A company’s mission statement defines its culture, values, ethics, fundamental goals, and agenda. The statement outlines what the company does, how it does it, and why. Prospective investors may also refer to the mission statement to see if the company’s values align with theirs.

A well-crafted mission statement articulates the purpose of your business.

It helps to serve as a framework for your business. Outlining what your business stands for, along with your objectives and values.

What is your mission statement? Why are you doing this? Is it just for the money? What’s your driving purpose for embarking on a trading career?

It’s critical to understand the why because it empowers the how.

What Is Your Company’s Philosophy?

A company philosophy refers to “the way we do things around here.” Conventionally, it relates to the fundamental beliefs of the people and the organization.

Your company’s philosophy boils down to your market beliefs.

Do you believe that it is fundamentals or emotions that drive the markets?

Or is it the Fed?

Your trading edges come from a deep understanding of how you view the market. And you need this deep understanding to stick to your strategies during a drawdown.

The last thing you want to do is have a shaky market philosophy and jump ship at the wrong time.

So what is your market philosophy? These will guide your principles.

What Are Your Company’s Principles?

Company principles refer to the principles that a company abides by throughout its day. These could be building a great workplace culture, conservative cash flow use, or taking significant, calculated risks.

What principles does your company abide by throughout your trading day?

These should stem from your philosophy.

For instance, if you believe that the Fed moves the market, are you selling your positions if the Fed is not printing money?

If you’re a trend follower, do you implement Paul Tudor Jones’ rule of refusing to purchase any stock below its 200-day moving average?

Having the various principles aligned with your market philosophy and mission will help you maintain the necessary discipline with your trading.

It will also help you understand what assets to trade.

Your Trading Universe

This is the range of financial instruments that a trader plans to trade across the investable universe, including all tradable assets. In reality, most investors do not invest so broadly and have a narrower universe that could be constrained to event-driven biotech stocks.

This is your total addressable market, and your edge governs it.

Assuming the above, if biotech is in a long-term downtrend, do your edges still allow you to make a profit? If not, you may need to grow your edges and the total addressable trading universe.

What Are Your Company Rules?

Company rules refer to the established rules, in writing, made by the company’s higher level of authority and bound to follow by all employees and stakeholders.

Often these rules revolve around conduct, hours worked, and customer service levels. And larger trading organizations should define these; however, the rules I’m referring to for a trading business help you protect your capital and add discipline to your trading operations to boost profitability — essentially money management rules, which I like to think of in four distinct categories.

1. Portfolio Management Rules

Portfolio management entails building and overseeing a selection of investments or investment strategies that will meet the long-term goals set above.

Most investors take the approach of diversifying their assets, which is a reliable measure.

However, a superior alternative is implementing uncorrelated strategies within the same asset class.

For instance, buyers tend to reduce their leverage during sell-offs, which causes both stocks and bonds to drop, even though these two asset classes are generally uncorrelated.

Therefore, having a mix of long and short stock strategies can help you offset this risk.

What are your portfolio management rules?

An example would never be allocating more than 25% of capital to a single strategy.

2. Risk Management Rules

Risk management is the process of identifying, assessing, and controlling threats to an organization’s capital and earnings. These risks stem from various sources, including financial uncertainties, legal liabilities, technology issues, strategic management errors, accidents, and natural disasters.

Remember that the aspect of trading you have considerable control over is how much you’re willing to lose on any given trade.

So, always go into a trade knowing your pre-defined price targets to take profits and the price points you’re willing to get out for a small loss if the trade goes against you.

The worst thing you can do is hold on to a losing trade that invalidates your thesis, hoping it will eventually become a winner.

An example of a breakout strategy risk management rule would be to set your stop at the low of the day, invalidating the idea if it moves against you, but never more than the average daily range.

3. Position Sizing Rules

Position sizing refers to the size of a position within a particular portfolio or the dollar amount that an investor will trade. Investors utilize position sizing to determine how many security units they can purchase, which helps them control their risk and maximize returns.

How much you will earn or lose from your trades is directly tied to the size of your trading positions.

Your position size will also impact your ability to diversify your trading positions.

If too large a portion of your trading account is tied up in one trading position, you won’t have the necessary capital to open other trades.

We never know which of our positions will be the big winners.

There is no worse feeling than watching the market rally, and you are in 3-4 positions that decide to sit out the rally.

Keep in mind that even with proper position sizing, there is a risk that an active trader’s position loses more than their specified risk if a stock gaps below the stop-loss order.

This is why it’s essential to position size correctly, especially around earnings announcements, which you may want to avoid altogether.

A common position sizing rule is to never risk more than 25% of your account on any single trade.

4. Leverage Trading Rules

Leveraged trading, also known as margin trading, margin finance, or trading on margin, allows you to open a trading position with a broker using a small amount of capital to take a much larger position.

Suppose you commit $10,000 on a 10X leveraged financial instrument. You’ll be trading as if you had put in $100,000.

Thus, any capital gains you make have a tenfold effect, but the same applies to losses, so using leverage implies an element of risk.

If you’re taking on leverage, ensure that your edges are well defined and diversified, and you have a clear leverage rule.

I will never go above 500% leverage, and this scales down as the volatility of the instrument increases.

Leverage is extremely risky in almost all cases. But there is one exception to this:

When trading crypto, using leverage can help mitigate the risk of an exchange hack at the cost of margin interest fees.

SWOT Analysis

With your rules established, it’s time to perform a SWOT analysis.

SWOT stands for Strengths, Weaknesses, Opportunities, and Threats, and so a SWOT analysis is a technique for assessing these four aspects of your business.

SWOT analysis is a simple tool that can help you analyze what your company currently does best and devise a successful strategy for the future.

1. What Are Your Strengths?

Strengths define what you excel at.

Perhaps you have a programming background, and you can create trading algorithms.

Perhaps you’re a decisive person who can make solid, carefully constructed decisions rather quickly.

Perhaps you’re able to stay calm and collected and perform under pressure.

For me, as you’ve probably guessed, it’s the first one that helps mitigate my weakness.

2. What Are Your Weaknesses?

Weaknesses prevent you from operating at your prime.

For instance, you may have difficulty dealing with market sell-offs and tend to get “sucked in” by the emotion of everyone else panicking.

The best way to mitigate this is to have a plan to take advantage of these opportunities.

The second best way is to reread your business plan and stay away from the news and social media on such days.

Plus, keep in mind that these sell-offs are often an opportunity in the market. Smart institutions often accumulate on sell-off days due to their liquidity constraints. If you’re a breakout trader, you should identify what stocks are acting stronger than the market.

As they say, one man’s misfortune is another man’s opportunity.

So, take note of your weaknesses and negative triggers. That way, you’ll be able to easily spot them and make logical decisions rather than emotional, irrational ones that will hurt your profitability.

My weakness?

I pay both my living and business expenses from my trading income. I would feel immense pressure to make money every day and override my trading systems in the early days.

I’m sure you can all guess what happened.

Understand what your weaknesses are, that they may change over time, and figure out how to mitigate them.

3. What Are Your Opportunities?

These refer to favorable external factors to grow your business or competitive advantage.

For instance, can your trading strategies be applied to additional trading instruments or different markets?

Crypto trading is attractive as an algorithmic trader as it trades 24/7 against relatively unsophisticated traders.

4. What Are Your Threats?

In contrast to opportunities, threats refer to factors that potentially harm your business.

Government measures towards reducing fossil fuel use towards energy production in favor of renewable energy sources pose a threat to any non-renewable energy sector business or energy stock in your portfolio.

And these types of risks apply to your trading business.

Changes in capital gains tax laws, crypto regulation, or even black swan events are threats.

Do you have proper hedging strategies in place?

With an understanding of your strengths, weaknesses, opportunities, and threats, it’s time to do some benchmarking.

Performance Measurement

Performance measurement is the process of collecting, analyzing, and reporting information regarding the performance of an individual, group, organization, system, or component.

They say what gets measured gets improved. And like other traditional businesses, trading businesses are no different.

To monitor your trading performance, you require data.

You can collect data manually from your trading platform and record it in a spreadsheet, but I highly recommend that discretionary traders use journal software that records the information.

Although there are hundreds of metrics you could track, you should track the following key performance indicators (KPIs) classified by market and strategy at a bare minimum:

• Profit & Loss
• Total number of trades
• Win percentage
• Average time in trade
• Largest winning trade
• Largest losing trade
• Average winner
• Average loser
• Maximum drawdown
• Profit factor
• Gain-to-Pain Ratio

Feel free to check out my website for definitions and example calculations for these metrics if you have questions.

Operating Costs

As promised earlier, we need to understand your trading business’s fixed and variable costs to determine the absolute minimum return.

Fixed costs are expenses that remain constant for a period of time irrespective of the level of outputs. Variable costs are expenses that change directly and proportionally to business activity level or volume changes.

So, what do these look like for your new trading business?

Fixed Costs

Here are some fixed costs trading businesses have at varying degrees:

• Computer & equipment
• Trading software
• Administration software
• Internet & telephone

You’re most likely already paying for the trading software, and the good news is that most of the home office expenses are relatively inexpensive.

But don’t forget to consider the most significant expense of them all — paying your managing member.

To understand your trading business’s true profitability, you need to track your monthly draw in your accounting software.

Variable Costs

Here are some variable costs involved with your trading business:

• Transaction fees
• Slippage costs
• One-time data costs

Office Location

Another aspect you also want to think about is if and where to set up an office.

As a trader, you can set up an office anywhere you like across the globe — granted, some time zones are more convenient than others.

You can set up your own home office.

You can also buy or rent your own business office.

A big driver of this decision is how well you can balance life and work while at home.

If you’ve got kiddos at home and cannot concentrate, the answer is typically straightforward.

Additionally, scaling to multiple employees is a little easier if you’re an algorithmic trader, as you can more easily separate roles.

These aspects determine whether it makes sense to stay at home or hang up a shingle somewhere outside of your personal space.

Regardless of where your office is, you’ll want to make sure you maximize the tax benefits.

Benefits For Incorporating

There are many benefits of incorporating your business, including asset protection through limited liability, corporate identity creation, perpetual life of the company, transferability of ownership, and an ability to build credit and raise capital and tax savings.

But if trading is your primary source of net income, you should consider incorporating it for tax purposes.

Securities are considered capital assets. The sales of these assets are taxable income considered as capital gains.

This can create massive tax liabilities on your trading operations, so it’s usually ideal for an active trader to incorporate as a company.

Additionally, trading is not considered a business activity by the IRS, so it is not possible to deduct business expenses as they are ineligible for tax deductions in this case.

This is noteworthy since costs such as software, internet access, and data access can be significant for most active traders.

However, you can receive similar tax treatment to other business owners by creating a separate business entity to conduct your trading activities.

You can form a sole proprietorship, partnership, or S-Corp, and file for trader tax status (TTS), which exempts you from the $3,000 capital loss limitation and wash sales adjustments.

A trader can form a single-member LLC to elect S-Corp trader status. The main tax benefits of creating an S-Corp are to arrange tax deductions for health insurance premiums and a retirement plan contribution.

In addition, an S-Corp does not pass through negative self-employment income (SEI), and the employee benefit deductions work tax efficiently.

C-Corps are not ideal for a trader status because the IRS might charge a 20% accumulated earnings tax and the 21% flat tax.

Before incorporating a company, ensure you qualify for it. The business must be eligible for claiming TTS.

While there’s no specific ruleset, we can look at prior court cases to determine eligibility guidelines.

As a trader, you need at least four trades per day. Trade executions on approximately four days per week. More than 15 trades per week, 60 per month, and 720 per year.

Your average holding period must be under 31 days.

Additional factors include having a material trading account size ($25,000 for pattern day trader designation on securities and $15,000 for other instruments).

Spending over four hours per day with the intention to run a business to make a living.

Plus, having trading computers, multiple monitors, and a dedicated home office.

Please keep in mind I’m not a lawyer or an accountant; please consult these professionals so they can understand your specific situation and tax law.

The Bottom Line

We’ve covered much of what you need to know for setting up your trading as a business.

It requires several moving parts, from determining your why, identifying an edge, creating your rules, and even getting into the nitty-gritty of incorporating a legal entity.

The exact, crystal clear method you specifically choose to become a successful trading business owner will not be drawn on a map for you.

Just kidding, there is a map.

It’s called Analyzing Alpha.

Be sure to subscribe to our newsletter below to receive exclusive email content that’s jam-packed with value to help you on your journey to becoming a truly successful and profitable trader.

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Trading Business Plan

Starting a trading business can be challenging because you have to build contacts, negotiate, and whatnot. But amidst worrying about all these things, planning is the last thing you want to worry about.

While anyone can start a new business, you need a detailed business plan when it comes to raising funding, applying for loans, and scaling it like a pro!

Need help writing a business plan for your trading business? You’re at the right place. Our trading business plan template will help you get started.

Free Business Plan Template

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• Fill in the blanks – Outline
• Financial Tables

How to Write A Trading Business Plan?

Writing a trading business plan is a crucial step toward the success of your business. Here are the key steps to consider when writing a business plan:

1. Executive Summary

An executive summary is the first section planned to offer an overview of the entire business plan. However, it is written after the entire business plan is ready and summarizes each section of your plan.

Here are a few key components to include in your executive summary:

Introduce your Business:

Start your executive summary by briefly introducing your business to your readers.

Market Opportunity:

Mention your product range:.

Highlight the product range of your trading business you offer your clients. The USPs and differentiators you offer are always a plus.

Marketing & Sales Strategies:

Financial highlights:, call to action:.

Ensure your executive summary is clear, concise, easy to understand, and jargon-free.

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2. Business Overview

The business overview section of your business plan offers detailed information about your company. The details you add will depend on how important they are to your business. Yet, business name, location, business history, and future goals are some of the foundational elements you must consider adding to this section:

Business Description:

Describe your business in this section by providing all the basic information:

Describe what kind of trading company you run and the name of it. You may specialize in one of the following trading businesses:

• Retail trading
• Wholesale trading
• Export-import
• Dropshipping
• Describe the legal structure of your trading company, whether it is a sole proprietorship, LLC, partnership, or others.
• Explain where your business is located and why you selected the place.

Mission Statement:

Business history:.

If you’re an established trading business, briefly describe your business history, like—when it was founded, how it evolved over time, etc.

Future Goals

This section should provide a thorough understanding of your business, its history, and its future plans. Keep this section engaging, precise, and to the point.

3. Market Analysis

The market analysis section of your business plan should offer a thorough understanding of the industry with the target market, competitors, and growth opportunities. You should include the following components in this section.

Target market:

Start this section by describing your target market. Define your ideal customer and explain what types of services they prefer. Creating a buyer persona will help you easily define your target market to your readers.

Market size and growth potential:

Describe your market size and growth potential and whether you will target a niche or a much broader market.

Competitive Analysis:

Market trends:.

Analyze emerging trends in the industry, such as technology disruptions, changes in customer behavior or preferences, etc. Explain how your business will cope with all the trends.

Regulatory Environment:

Here are a few tips for writing the market analysis section of your trading business plan:

• Conduct market research, industry reports, and surveys to gather data.
• Provide specific and detailed information whenever possible.
• Illustrate your points with charts and graphs.
• Write your business plan keeping your target audience in mind.

4. Products And Services

The product and services section should describe the specific services and products that will be offered to customers. To write this section should include the following:

Describe your products:

Mention the trading products your business will offer. This may include product categories, product range, product features, product sourcing, etc.

Describe each service:

Mention the trading services your business will offer. This may include:

• Logistics & shipping
• Warehousing & storage
• Distribution & fulfillment

Additional Services

In short, this section of your trading plan must be informative, precise, and client-focused. By providing a clear and compelling description of your offerings, you can help potential investors and readers understand the value of your business.

5. Sales And Marketing Strategies

Writing the sales and marketing strategies section means a list of strategies you will use to attract and retain your clients. Here are some key elements to include in your sales & marketing plan:

Unique Selling Proposition (USP):

Define your business’s USPs depending on the market you serve, the equipment you use, and the unique services you provide. Identifying USPs will help you plan your marketing strategies.

Pricing Strategy:

Marketing strategies:, sales strategies:, customer retention:.

Overall, this section of your trading business plan should focus on customer acquisition and retention.

Have a specific, realistic, and data-driven approach while planning sales and marketing strategies for your trading business, and be prepared to adapt or make strategic changes in your strategies based on feedback and results.

6. Operations Plan

The operations plan section of your business plan should outline the processes and procedures involved in your business operations, such as staffing requirements and operational processes. Here are a few components to add to your operations plan:

Staffing & Training:

Operational process:, equipment & machinery:.

Include the list of equipment and machinery required for trading, such as office equipment, warehouse equipment, transportation vehicles, packaging & testing equipment, etc.

Adding these components to your operations plan will help you lay out your business operations, which will eventually help you manage your business effectively.

7. Management Team

The management team section provides an overview of your trading business’s management team. This section should provide a detailed description of each manager’s experience and qualifications, as well as their responsibilities and roles.

Founders/CEO:

Key managers:.

Introduce your management and key members of your team, and explain their roles and responsibilities.

Organizational structure:

Compensation plan:, advisors/consultants:.

Mentioning advisors or consultants in your business plans adds credibility to your business idea.

This section should describe the key personnel for your trading business, highlighting how you have the perfect team to succeed.

8. Financial Plan

Your financial plan section should provide a summary of your business’s financial projections for the first few years. Here are some key elements to include in your financial plan:

Profit & loss statement:

Cash flow statement:, balance sheet:, break-even point:.

Determine and mention your business’s break-even point—the point at which your business costs and revenue will be equal.

Financing Needs:

Be realistic with your financial projections, and make sure you offer relevant information and evidence to support your estimates.

9. Appendix

The appendix section of your plan should include any additional information supporting your business plan’s main content, such as market research, legal documentation, financial statements, and other relevant information.

• Add a table of contents for the appendix section to help readers easily find specific information or sections.
• In addition to your financial statements, provide additional financial documents like tax returns, a list of assets within the business, credit history, and more. These statements must be the latest and offer financial projections for at least the first three or five years of business operations.
• Provide data derived from market research, including stats about the industry, user demographics, and industry trends.
• Include any legal documents such as permits, licenses, and contracts.
• Include any additional documentation related to your business plan, such as product brochures, marketing materials, operational procedures, etc.

Use clear headings and labels for each section of the appendix so that readers can easily find the necessary information.

Remember, the appendix section of your trading business plan should only include relevant and important information supporting your plan’s main content.

The Quickest Way to turn a Business Idea into a Business Plan

Fill-in-the-blanks and automatic financials make it easy.

This sample trading business plan will provide an idea for writing a successful trading plan, including all the essential components of your business.

After this, if you still need clarification about writing an investment-ready business plan to impress your audience, download our trading business plan pdf .

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Frequently asked questions, why do you need a trading business plan.

A business plan is an essential tool for anyone looking to start or run a successful trading business. It helps to get clarity in your business, secures funding, and identifies potential challenges while starting and growing your business.

Overall, a well-written plan can help you make informed decisions, which can contribute to the long-term success of your trading company.

How to get funding for your trading business?

There are several ways to get funding for your trading business, but self-funding is one of the most efficient and speedy funding options. Other options for funding are:

• Bank loan – You may apply for a loan in government or private banks.
• Small Business Administration (SBA) loan – SBA loans and schemes are available at affordable interest rates, so check the eligibility criteria before applying for it.
• Crowdfunding – The process of supporting a project or business by getting a lot of people to invest in your business, usually online.
• Angel investors – Getting funds from angel investors is one of the most sought startup options.

Apart from all these options, there are small business grants available, check for the same in your location and you can apply for it.

Where to find business plan writers for your trading business?

There are many business plan writers available, but no one knows your business and ideas better than you, so we recommend you write your trading business plan and outline your vision as you have in your mind.

What is the easiest way to write your trading business plan?

A lot of research is necessary for writing a business plan, but you can write your plan most efficiently with the help of any trading business plan example and edit it as per your need. You can also quickly finish your plan in just a few hours or less with the help of our business plan software .

About the Author

Upmetrics Team

Upmetrics is the #1 business planning software that helps entrepreneurs and business owners create investment-ready business plans using AI. We regularly share business planning insights on our blog. Check out the Upmetrics blog for such interesting reads. Read more

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How to Trade Stocks As a Home Business

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Many people prefer the freedom that working from home provides to going to an office. Owning your own business or working for yourself gives you even more independence, and stock trading through a limited company is one way to do it. To support yourself and your family, you'll want to make a stock trading business plan. Understanding the types of trading businesses and ways to work from home as a stockbroker is also essential.

Preparing for a Stock Trading Business Plan

You first must educate yourself about the stock market and stock trading. Hundreds of people download apps or engage in independent online trading without experience every day, but few are successful. You need work-based education or a degree to succeed in stock trading.

Some people fall back on their undergraduate education, especially if they have a background in business or finance. If you don't, experts recommend taking an online course in stock trading and learning as much as possible about the field. Educate yourself on current events in the world of stocks by reading the Wall Street Journal and similar publications.

When making a share trading business plan, you may want to consider trading and being an expert in one type of stock. Staying on top of stock industry trends helps you make the wisest decisions possible. The last step in preparing for your day trading business plan is to open a separate trading account and fund it. This trading account will be your startup fund, and you should manage it carefully. You need to keep detailed records for share trading business taxation purposes.

Types of Trading Businesses

Next, finalize both your trading strategy and objectives. One integral step is to learn the types of trading strategies and plans; the experts at Investor.gov provide a rundown of what stock trading entails. You can download sample trading strategies online from experienced traders. When you create a trading strategy of your own, you can use one of theirs as a template for yours or simply as trading business examples while you write your own.

Many home traders incorporate, even if they never plan to represent anyone's interest other than their own. Running your trades as a business protects your personal assets. Establishing yourself officially as a day trader has some additional benefits, too. It means that you can take more losses under IRS rules.

Once you begin trading, you may want to explore software options for managing and monitoring your investments. Some people create their own using spreadsheets. In general, you want to maintain a strict level of discipline in your decisions to buy and sell stocks, keeping your larger objectives in mind.

Working From Home as a Stock Broker

Another option if you want to work in stocks is to become an official stock broker and work from home for a larger company. Especially after the initial lockdowns at the beginning of the Covid-19 pandemic, many more employees across every industry are working from home.

Stock trading through a limited company may help you avoid a significant amount of risk since you'll be representing it rather than just yourself. It may also provide you with various benefits, such as better health insurance, paid leave, vacation, holidays, and other benefits you would have to buy yourself if you worked independently.

Regardless of whether you work for a firm or only for yourself, the experts at Business Insider mention that it's essential you correctly fill out your tax forms and pay taxes. Depending on the size of your investments, you may want to pay your taxes quarterly rather than all at once at the end of the year. Don't forget that you can also write off some of your losses as a trader. Consult a tax professional for more information.

• Investor.gov: What Are Stocks?
• Business Insider: Stock Trading: How to Get Started for Beginners
• Financial software will greatly help you track purchases and sales with security descriptions. You'll need this for IRS purposes. Keep excellent records to avoid problems.
• Deduct home office expenses against your business. You can deduct a portion of your home mortgage or rent, as well as computer equipment, Internet access and phone lines. Software, publication subscriptions and tax advising are all deductible against your business.
• Trading is not for everyone. If you are considering full-time trading, start with a moderate amount of money to test strategies and discipline before you embark on it as a sole means of income.

Danielle Smyth is a writer and content marketer from upstate New York. She has been writing on business-related topics for nearly 10 years. She owns her own content marketing agency, Wordsmyth Creative Content Marketing, and she works with a number of small businesses to develop B2B content for their websites, social media accounts, and marketing materials. In addition to this content, she has written business-related articles for sites like Sweet Frivolity, Alliance Worldwide Investigative Group, Bloom Co and Spent.

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• 1 How to Monitor the Stock Market to Buy Stocks
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Trading As A Business

Answers to all your questions about how to get started with your trading business..

• What Is A Trading Business?

Why You Need A Trading Business Plan?

• Your Trading Purpose
• Your Trading Process/System
• Risks/Costs of a Day Trading Business
• How Much Starting Capital Do You Need For Your Trading Business?
• Define Your Trading Team
• How To Grow Your Trading Business

How to Start a Stock Trading Business

What is a trade book, what to include in your trade book, day trading computers and monitors, parting thoughts on starting a day trading business.

• PARTING THOUGHTS

How To Set Up A Stock Trading Business From Home

Not many people approach stock trading like an ordinary business. Sure, they want to make gobs of money, and fast. But, rarely do you see the budding day trader plan out his trading business like he would any other brick and mortar startup. Perhaps this is why there are so many casualties in this industry – because very few treat day trading as a serious business.

It is no surprise. There are a myriad of advertisements across the internet offering get-rich-quick opportunities in the market. Gurus and furus offer their services for a nominal fee and promise millions, just like their best students have made. Heck, they even show you their brokerage statements to prove it!

But is it that simple? And what structure do these services provide for you? Do they teach you how difficult the path to success will be? Do they tell you how many students have dropped out of their programs on account of failure?  

Better yet, do they provide a structure and a framework for how to plan your career, much like you would a business?

Day trading without a true business plan is a lot like gambling. You say to yourself, I’m going to throw my life savings at these internet gurus’ wisdom and hope for the best. A year later, you’ve probably coughed up half your savings, if you’re lucky to still have any.   

Let’s just hope you kept a side gig in the process.

Such is the plight of many aspiring entrepreneurs in the trading world, unfortunately. So, in this post, we’ll lay out for you just how treacherous the path can be, and offer you a better structure to kick-start your trading business.

What Is a Trading Business?

  A trading business is like any other business. You may decide to incorporate or act as a sole proprietor. Regardless, starting a day trading business is very simple. All it takes is applying with a brokerage and loading money into your trading account. For that reason, it can be a dangerous business to start, with such a low barrier to entry.

Just like any other endeavor, you’ll be required to pay taxes on your profits. However, there are certain limitations to the tax rules for day trading that you should be aware of. We will touch on these in a moment, but suffice it to know that like other businesses, you will need to be aware of what write-offs can apply to your business along with the short and long-term capital gains you’ll be responsible for.

Unlike a brick-and-mortar business, you don’t need anything but a computer or mobile device to start a trading business. You won’t have the expense of restaurant equipment, medical malpractice insurance, or the headache of managing employees. These days you can place a stock order with iPhone apps or more advanced trading software on computers. That and an internet connection are all you need to get started. Literally.

But just as buying stoves and ovens, tables and chairs, and having the best recipes in the world won’t guarantee a successful restaurant business, so having the best computer, broker, or guru won’t guarantee you’ll make money in the market.

Why You Need a Trading Business Plan?

One of the most overlooked, yet most important parts of a successful trading business, is the trading business plan. Why do you need a trading business plan? For a handful of reasons:

• It will force you to research your business and the likelihood of success.
• A trading business plan will help you stay grounded with realistic expectations.
• During the rough times, it will guide you into re-evaluating your process.

What Are the 6 Elements of a Good Trading Business Plan?

Every business needs a business plan. Usually, you’ll have an executive summary, description of your team, products/services, market outlook, financials, etc. But for trading, the variables are a bit different. Your team is really just you, with some exceptions. Your product is your trade plan, and your financials are just your available capital. Let’s look at each of the 6 elements of a good trading business plan more in-depth:

1. Your Trading Purpose

We’re big proponents of purposeful trading. Everyone’s “why” is going to be different, but it’s important to lay this out. It doesn’t have to be for anyone but you. That being said, the more you think about why you want to trade, the more it should motivate you to succeed at it. Every entrepreneur has a why or a purpose for what they do. Could it be as simple as “making more money?” Sure. But we’d encourage you to dig a little deeper and find more than just that. Here are some examples of why you might want to start a trading business:

• To work for yourself
• Increase wealth
• Learn a new skill
• Spend more time at home
• Be available to your family and friends
• Have the ability to give more
• Pay off debts

There are many reasons why people trade. Spend some time thinking about why you want to start a day trading business and write this down, mull it over, and expound on it. The more concrete your reasons become, the more tangible your efforts will be to achieve success.

Think of them like outcomes. Sure, profitability is the ultimate goal. But what does profitability afford you? Time? Love? Charity? This should be the start of your trading business plan.

2. Your Trading Process/System

Would you open a new restaurant without a menu? How about a proven recipe? Would you just run to the grocery store every day and cook up whatever you felt like that night? Absolutely not. Restaurants work well if they are scalable in a very systematic way. It all starts with the layout of the kitchen. The grill is on one side, the sauté in the middle, and the food prep, washing and storage in another area. Depending on how fancy you get, you’ll have a salad prep, dessert, coffee area, etc. It’s all designed to flow in a cyclical rhythm to keep things running smoothly.

The menu also very rarely changes in restaurants, unless the chef adds a special here or there. And the recipes are often guarded secrets that never change. Perhaps seasonal offerings will vary, but the staples of the restaurant are usually known and predictable. So should your trading system be . In your trading business plan, you must lay out not only the strategies you will use, but in what type of market those strategies will work well. Get the seasonal allegory there? You see, trading the markets is a lot like other businesses in that the more systematic you are the more consistent you’ll be, and the more your patrons (your profits) will want to come back and dine with you. Screw around with too many recipes (strategies) at once, come to the market disheveled, unorganized, and unprepared, and you’ll end up with a kitchen in chaos, customers walking out the door, and your profits disappearing. It has to be a well-oiled machine. To avoid chaos, this section of your trading business plan should involve a Trade Book. We’ll discuss your trade book more in-depth below.

3. What Risks/Costs Are Involved in a Day Trading Business

Starting a new business is risky. There’s no way around it. If you want to get ahead in life, you’re going to have to risk something: money, time, failure, other opportunities. Humans crave security. But trading markets doesn’t provide that. It provides uncertainty. Now, you may be thinking that if you make a million dollars in the stock market then you’ll have security. And that may be true. However, the odds of success are not in your favor. And as a rule of thumb, the market is a game of uncertainty at its very core. In order to win, you must learn the science of probability and the need to overcome your own human emotions . Couple that with an artistic sense of intuition and discretion, along with a favorable market condition, and you might be successful. As part of that, outlining what risks and costs are involved in your day trading business would be a good place to start. We recommend that you consider the following when calculating your risk/costs

• Computer and other hardware costs
• Software fees, charting tools, scanning software, etc.
• Broker fees: commissions, short locate fees, ECN fees, etc.
• Educational courses, books, and materials
• Chat room/mentorship subscriptions or service fees
• Maximum drawdowns in your account
• Time associated with being in the market (9:30am - 4pm EST)
• Extra time devoted to review, study, and analysis
• Re-investment of capital
• Funds to top up your account
• Time frame needed for profitability (Most traders, like businesses, take 2-4 years.)

These are just some of the costs and risks associated with trading. If you end up with a catastrophic loss, how will that impact your trading business plan?

While there are many free resources available to traders, we’d venture to say that most traders will spend many thousands of dollars just learning how to trade – not to mention how much they lose in the markets.

Obviously, we’re big proponents of learning how to trade the safe way – in a simulator . Unfortunately, most new traders like to learn the hard way. Whichever way you go, we encourage you to keep your costs and risks in check. Outline them and budget for these items long before you pull the trigger on your trading business.

4. How Much Starting Capital Do You Need For Your Trading Business?

Before we answer this question, we cannot stress enough how important it is to first PROVE that you can trade consistently in a simulator for many, many months. Funding your trading account is not the first thing you need to be thinking about. Spending time in a simulator is the first thing you need to think about. Period. Spend the time necessary to backtest and outcome test your strategies in our analytics here at TradingSim. You can trade the market for the past 3 years at any time, testing your strategies. Once you’re successful and consistent, then think about funding your account. There, now that we’ve gotten that out of the way, let’s talk about funding your account.

What Is the Pattern Day Trading (PDT) Rule?

Assessing how much money you need to start with depends largely upon your financial standing. The Pattern Day Trading rule was enacted shortly after the bull run of 1999-2000. It limits how many day trades you can make within a 5-day period to only 3 — that is, if you’re account is below $25,000. This is something to consider when you fund your account. If you plan on day trading, starting above $25k might be wise. That being said, we’re big proponents of proving to yourself what you can do in the market before you add to your account. We’ve written before about the PDT rule and ways around it . There are options like offshore brokerage accounts, opening multiple US-based cash brokerage accounts, etc. We won’t dive into that here, but if you’re unfamiliar with these options, be sure to check them out. As a general rule, start small. Start small enough that your account can grow without the headaches of forced errors due to having a small, restricted account. But not big enough that it will cost you dearly if you make rookie mistakes. And trust us. You’re going to make rookie mistakes. Plenty of them.

Generating Income During Your Early Trading Days

For your business trading plan, be sure to outline what you will do for income. It takes most traders many years to reach consistency in the markets. And by consistency, we mean being able to not only make a living but also continue to bankroll your trading account. To that end, take the stress off your shoulders by trading part-time until certain goals are reached. Or, if you decide to go full-time, be sure to outline your expenses, and the amount of savings you will need to set aside for 1-3 years of ups and downs in the market. In addition, lay out your contingency plan. Define ahead of time what you will need to do if certain milestones aren’t reached. Lastly, discuss this with your partner. There’s nothing worse than having your family responsibilities jeopardized because of a whimsical and ill-planned trading business. As the saying goes, err on the side of caution. Imagine the worst, then double that, then add a little more on top. That’s the kind of “risk” cushion you need for your trading business.

5. Define Your Trading Team

Every good business has a good team. Whether it is a board of directors, consultants, or management team; the best businesses have good leadership. Organize your trading business the same way. Granted, your trading business won’t be structured the same way your normal business is structured. You’re the only one responsible for clicking the buy and sell button in the market. However, there are people you can add to your team to help you along the way.

How To Find a Good Mentor for Trading

Finding a good mentor in stock trading is easier to find nowadays. There are a lot of “mentorship” services available online. Not all of them are created equally, though. When you’re searching for an educational service or mentorship, we recommend taking your time. Think of it like car shopping. The best car buyers do their research online first, narrow down what they want in a car: brand, price, color, miles, trim level, etc. Then, it is a matter of heading to the dealership to test drive, ask questions, etc. Just like a dealership, you’re going to find hungry salesman wanting “to do business with you today!” But you need to be on guard. It’s your money, your experience, and ultimately your decision. Stand your ground and always take everything with a grain of salt. Look at online reviews like TrustPilot. Ask around on Twitter. Look under the hood with “trial” memberships. Really do your due diligence. Yet, understand that no mentorship or educational service is going to be perfect. In fact, you should go into each educational service expecting to learn something new from as many mentors as possible. In this way, you’ll learn that your biggest asset is being your own trading coach. Now, to bring this full circle for your trading business plan, do your research first. Outline the top 10 trading educators you can find. Exhaust yourself with the effort, then narrow down your results to the top 5. Start there, and give yourself time to work through your list. In your trading business plan, identify which services you will try and which ones you might avoid. Also, include non-trading mentors in your business plan. Perhaps your spouse, a close business friend, or a confidant can provide a fresh perspective. And one of the best ways to find a team is by picking up trading buddies along the way. All of these educational services have tons of people just like you. Reach out to them and try to connect! We would also be remiss to not recommend a good psychology coach. We’re big fans of Dr. Brett Steenbarger and his books. Don’t go without them.

6. How To Grow Your Trading Business

This section of your trading business plan may not fully materialize until you are well on your way to consistency in trading. You see, the path to success in trading looks something like this:

• Make a little
• Profit more
• Make big money

You won’t really know how to make big money unless you find a system that is scalable. In fact, many millionaire day traders find themselves at a place in their career where they have to adjust their strategies because their accounts have become too big for the strategies they used when their accounts were smaller.

While this isn’t something you should worry too much about early in your career, it should be in the back of your mind.

Typical businesses require some form of marketing to grow, right? Not only that, but they need a scalable system. Build a successful restaurant, systematize its operation, then you can turn it into a franchise. Voilá!

Trading is very similar. The market is all about compounding your profits. When you find a scalable trading system, you’ll want to spend the necessary time growing it. This requires having the right strategy, the right risk management , proper experience, and the emotional capacity to trust your system despite larger account swings up and down.

Keep this section of your trading business plan open. Add to it as you evolve as a trader and your strategies evolve. Conduct research on what the largest players in the market do to compound their large gains.

Now that we’ve outlined the 6 best elements of a successful trading business plan, let’s get into the nitty-gritty of creating your day trading business. We’ll uncover topics like how to create a trade book, the best tools for your trading business, and more.

Create A Trade Book for Trading Strategies

Essential to your trading business is your trade book. Aside from your trading business plan, this is hands down the most important part of your trading business. Every trader should have one.

A trade book is a compilation of your trading education, style, strategies, statistics, rules, and more. It is a road map for where you want to be as a trader, and how you are going to get there. It will take a lot of the guesswork out of trading and ground you in a tested strategy. That is not to say that your trade book is set in stone. It will undoubtedly evolve as your career progresses. Along the way, you’ll want to add bits of information, evolved strategies, and more. A trade book should be a document that you keep handy and consult frequently to ensure that you’re trading according to the process you have outlined for yourself. This will keep you from the pitfalls of overtrading, trading less than stellar setups, and falling off the bandwagon into “style drift”.

Everyone’s trade book will be different. However, at a minimum, you should have all the criteria and information you need to execute trades successfully each and every day, from start to finish.

Here are a handful of items you should have in your trade book:

• Your trading “why”
• Education materials
• Current areas of improvement needed
• Your trading edge/strategy
• Trading rules for your strategy
• Money management rules
• Trade management rules
• Best trade examples with annotations
• Worst trades with annotations
• Any data or statistics to support your trading edge

Let’s take a look at a few examples of these 10 trade book chapters and how you can flesh them out for your own purposes.

1. Areas to Improve and Maintain Discipline

This section of your trade book will need to be updated from time to time as you grow as a trader. The goal here is not to be hard on yourself, but to be realistic with the weaknesses you are showing in your trading.

Here is a snapshot of a personal list of things that this author wrote in his own trade book:

• Tendency to enter trades before technical criteria are met
• Exhausting myself before the move I want occurs
• Limiting my profits by being happy with getting back the money I lost on the trade
• Going in with too much size without the A+ setup revealing itself
• Lack of patience and management once a trade is going in my favor
• Impulsive entry or exits based on time frames that are too low to base decisions off of
• Making decisions based upon p/l
• Internalizing bad performance
• Overtrading in an effort to time the entry perfectly
• Being aware of the Alpha mindset that wants to force trades
• Resetting after every trade
• Breathing exercises for calmness and relaxation

As you can see, there are a lot of issues facing traders. Some of these may affect you, or you may have your own set of struggles to overcome. As you trade, keep a journal to jot down the weaknesses you want to work on, and set a goal each week to tackle those issues.

2. Explaining Your Edge/Strategy in the Market

This is another important aspect of your trading book, perhaps the most important. The goal of your trade book is to define how you trade, what you trade, and when you trade so that you stay rooted in a systematic approach to your trading business.

Your edge will vary, but here is an example of what your edge description might look like in your trading book:

My edge is a combination of things that involve a certain sentiment on the daily time frame, followed by smaller time frames. Here are a handful of what I consider my edges:

• Reversals off daily/weekly moving averages, usually in bear or bull flag formations.
• Trading Range springs and upthrusts, or Mean Regression trades
• Wyckoff Wave Patterns that consolidate into a tight price action with Volume Dry Up (VDU) and pocket pivots as entry points waiting to take off.
• Parabolic reversals intraday
• Shorting manipulated low float stocks that are very extended

Within these, my trading strategies for entries remain the same as outlined below in the Trading Plan section. I am looking for the exact same entries on any time frame.

Once you broadly define your edge like this, you will also create a solid trade plan on how you execute these strategies. But before we get to that, you should also take the time to set your trading rules.

3. Trading Book Trading Rules

For your trading rules, we suggest you take time to think about what time you’ll trade, your position size, any mental hacks you need, stop loss criteria, and more. These can be broad or very specific. It will be up to you to tweak this over time to find the set of rules that work best for you.

A great example of a set of rules for trading is found in a book called The Complete Turtle Trader by Michael W. Covel. In this book, Covel uncovers the amazing story of how a small group of traders became millionaires by applying to Dennis Richards's experiment for training traders to become successful by following his strategies.

Richards was a floor trader for the Chicago Mercantile Exchange who made 10s of millions of dollars in the 70s and beyond. His “turtle traders,” as he called them, were given a set of rules to follow that looked like this:

• Entry: Buy when the price breaks above the 20-day high
• Stop loss: 2 ATR from the entry price
• Trailing stop loss: 10-day low
• Risk management: 2% of your account
• Vice versa for short trades

They were trend traders and the rules were very simple. However, your rules might be very different and more involved. Here is an example of a few typical rules that traders like to follow:

• Always cut your losses quickly
• Never average down on a losing trade
• Take profits at 20-25%
• Maintain at least a ⅓ risk/reward ratio

Again, this is just a small sampling of rules. It will be up to you to determine the rules you need in place for not only your strategy but your mindset and personality as well. This will help you keep your trading business going for the long haul.

4. How to Create a Trading Plan

• Daily Max Loss
• Daily Profit Goal
• Stock Change %
• Stock Catalyst
• Volume Metrics
• Average True Range
• Relative Volume
• Indicators needed
• Confirmation of strategy
• Entry Signal
• Trade Management Rules

Fill out all these metrics and you’ll be well on your way to having a solid trading plan. Be sure to really flesh out the details of each criteria, and then give examples of trades that fit these criteria.

To help visualize this, here is a snapshot of a trade book trading plan:

5. Money and Risk Management for Your Strategies

No trading plan is complete without defining your money and risk management protocol. Every trade might be slightly different, but as a rule of thumb, we recommend only risking about 0.5-2% of your entire capital on any given trade.

Here is an example of how you might define your risk management strategy for shorting a head and shoulders pattern:

Risk Per Trade : $450 or HOD, whichever comes first

Profit Target Per Trade : $1000 +

Max Loss Per Trade : $750

Trade Limits :

• Give the stock enough time to bounce and fail and return back into the trading range.
• Look for a squeeze before a drop if the stock feels weak
• The earliest entry can be on an “undercut and rally” or “overthrow and drop” if momentum is really waning.

Time Constraints : Pre/Post and Normal hours depending on volume, after 10:30am usually the best

Stop Loss Mechanism : Hard stop just above High of Day (HOD) and LOD on early entry. Hard Stop just above higher low / lower high on “right shoulder” entry.

Break-even Win% : This will depend on your statistics with the trading strategy.

6. Use Statistics in Your Trading Book

One of the absolute best ways to determine your chances of success on a strategy is to test it in a simulator by outcome testing your results. At TradingSim, we have the analytics that allow you to do just that.

As you test your strategies and begin to populate your trading book, be sure to include the statistics you’ve found in the simulator for each edge that you document.

Studying your winners and losers based upon the specific strategies you use will give you the confidence to take these trades in real life. So be sure to specify your win rates and any caveats for your strategy by testing these outcomes in a simulator first.

If you’re going to be a day trader, you’ll need a decent computer and a monitor. While we’ve heard of people day trading on their phones or iPads, it’s less than ideal. The reason for this is that you need to not only be able to analyze charts in real-time, but you may need to check other data as well. You’ll need screen space for your broker, your charting platform, any newsfeeds or chat rooms, twitter, etc. A solid computer and multiple monitors make this more efficient. Likewise, you’ll probably want multiple chart windows up simultaneously. This helps you keep track of the movements in individual stocks as the day progresses. Not having screen space for this might result in missed trades. And we wouldn’t want that!

Day Trading Stock Brokers

While we are not in the business of recommending stock brokers, this will be a key component of your trading business, so the decision shouldn’t be taken lightly. We recommend that you try many different brokers and do your own research before pulling the trigger on one.

When you are picking the right broker for day trading, you want to consider the type of trading you want to do. For example, many day traders like to short. In order to do this, you will need a broker with a solid list of shortable stocks. Not every broker will have this.

Consult with your broker and ask around the net for answers to some of the following questions:

• Do you have a good list of hard-to-borrow stocks?
• What trading platform do you provide?
• Are pre-market and after-hours trading allowed?
• What are trade cut-off times?
• Do you have margin, and what are the rates?
• What is customer support like?
• Does the platform include a mobile app?

At the very least, you should be able to demo their product to get a feel for it and decide whether or not it is a good fit for you and your trading style.

Charting and Trading Platforms

While many brokers will include a charting and trading platform, you may find that their charts don’t satisfy your needs. After all, there are quite a few standalone charting services available that cater specifically to charting, regardless of brokers or trade execution. Many traders will run their charting platforms as a standalone so that they can employ unique trading indicators and technical analysis tools that their broker might lack. This can empower your trading, enabling you to dive deeper into volume and price action without needing a clunky brokerage chart. It also frees you to choose which broker might provide the best service or execution independent of their software.

Trader Tax Accounting

There are two things guaranteed in life, death and taxes, right? Well, day trading has the potential to rack up a lot of taxes, so you’re going to need an accountant who knows what they are doing. Making a few investments here and there can easily be handled by your typical CPA. However, there are a lot of rules and regulations involved with actively trading. Wash/sale rules, what constitutes an active trader, marked-to-market rules, and many other things can affect your status and tax liability as a day trader. For that reason, we recommend you hire a professional who knows what they are doing before you jump into trading. Be sure to consult with them on your other businesses, how much you plan to trade, and any other income sources you have. While we don’t recommend any specific accountant over another, there are a few trading-specific accountants that we know of: https://tradersaccounting.com/ https://tradertaxcpa.com/ https://greentradertax.com/ Use them at your own discretion and risk, but understand that reconciling thousands, if not hundreds of thousands of trades, takes specialized software and accounting. You might be able to figure it out on your own by using https://www.tradelogsoftware.com/ . But the help of a knowledgeable accountant is always advantageous.

Finding a Day Trading Community

Day trading is a lonely business. You’re sitting at your desk for hours on end, pouring over charts and data. Not only that, but you will experience emotional highs and lows during this process. To that end, we recommend that you find a good day trading community to support you. We’ve written before on chat rooms and how to make the most of them, so be sure to check that article out. In it, we discuss the role that chat rooms play in the market and in trading development. Not all chat rooms or educational services are created equally, though. So, be sure to vet services properly and as inexpensively as possible until you find one that resonates with your style of trading and social interaction. Being a part of a community also serves as an accountability tool in the market. A good business will likely have some type of review board that oversees and provides accountability for the business. In trading, you’re responsible for your own actions. And, for that reason, it would be ideal for you to have a trusted group of trading partners that you can bounce ideas off, conduct review sessions, and keep yourself on track both mentally and professionally.

The Best Simulation Software for Your Trading Business

While we may seem biased, we truly believe that this piece of the puzzle is one of the most important and overlooked aspects of day trading. So many traders are willing to risk their hard-earned cash before they have a proper understanding of how markets work. It is irresponsible and risky, at best.

Here at TradingSim, we offer the best simulator for market replay , simulation, and analytics. Unlike most stock market simulators, we allow you to replay Level 2 and intraday data for up to 3 years. As a day trader, you’ve got the ability to “relive” the market as much as you want, and when you want.

Because day trading can be both systematic and discretionary, you’ll enjoy the built-in analytics software that TradingSim offers. In order to test your trading skills and outcome test your performance on a specific strategy, you’ll need this. Any great trader knows the power of statistics. Be sure to spend time in the sim testing your process before entering the market with real money.

Not convinced? Don’t take our word for it. The most prolific trading psychologist in the world has this to say about simulation trading:

Indeed, it’s often because of our need to make money and our overconfidence that we pursue shortcuts in our learning processes as traders and take too much risk. That leads to volatility of P/L and losses, which in turn trigger our nervousness, tension, stress, fear, and worry.

What I’ve long liked at TradingSim is the focus on learning trading–and doing that in safe ways where we can’t trigger and traumatize ourselves.

Think about every performance field: athletics, acting, music. In none of those do we start out by following people online, doing some reading, and then trying to make a living from our performance. Rather, we recognize that it takes years of practice and mentoring to become a professional athlete, movie star, or recording artist.

When we take shortcuts in the development process, our unrealistic expectations set us up for disappointment, frustration, and pain.

Many, many times the answer to emotional disruptions in trading is to work on our trading.

Dr. Brett Steenbarger, Ph.D.

What Are the Best Day Trading Courses?

Day trading courses abound on the internet. You can find free ones on YouTube, or pay tens of thousands of dollars to join “exclusive” day trading clubs, services, and challenges. There are also many books written on day trading and the many different styles of trading. Though we won’t recommend one over the other, what we do recommend is that you spend as little money as possible to begin with on education. The internet abounds with free resources. We’re even dedicated to helping the cause here at TradingSim with our blog and educational material. That being said, once you’ve scoured the net and read as much as you can, we do recommend trying as many services as you can comfortably afford that cater to your desired style of trading. If it is shorting small-cap stocks and momentum, find a good trading service that teaches you how to do this. Regardless of the style of trading, we recommend that you use discretion to find a trading course that offers an approach to tape reading, volume and price analysis, and trader development. Study some of the great ones, like Richard D. Wyckoff. You won’t go wrong with an understanding of sound technical analysis, which you can apply to any style of trading.

Finding a System for Your Day Trading Business

As part of your educational growth and development, you’ll eventually need to land upon a solid system. For example, if it is the methods of Wyckoff that truly speak to your style of trading, then perhaps you want to establish a trading system solely dependent on springs and upthrusts. You’ll learn more about what makes springs and upthrusts work so well inside trading ranges if you spend the time necessary to develop a trading system based on these strategies. Here is an example of what this might look like on a chart: Spring But this is only one example. We discuss these types of price action trading strategies more in-depth in another article. And if you’re struggling to find a “system” for your trading, be sure to give our post on “ how to find an edge ” a quick read.

Keeping a Routine Schedule - Just Like Normal Employees

If you’re going to be a professional day trader, you need a professional routine. The markets open and run from 9:30am until 4pm EST every single day. You need to be there, obviously.

Routines may stifle creativity or balance if taken to extremes, but your need for routine in the markets will depend largely on your trading system. For example, if your system requires you to be present at the opening bell, then you might need to wake up early, have an exercise routine, do some meditation, then research the morning movers for that day in the pre-market.

This kind of routine will allow you to come to the market prepared. Less preparation = Less profits in the long run. Without plans, your system is really just a series of impulsive and reactionary trading ideas that may or may not work. In essence, don’t be a gambler.

The more routine you become in your trading business, the more disciplined you will become. Likewise, the more disciplined you become, the better chance of success you will have.

Here are some tips we recommend you adopt in your routine:

• Rise early in the morning
• Feed your brain and your belly
• Exercise before the day begins
• Arrive at your desk at routine time each morning
• Give yourself plenty of time to research the day’s trades
• Plan your trades before you take them
• Allow for breaks midway through each day
• Balance your work life with family time
• Leave room for review each day
• Become self-aware as to how healthy your routines is
• Be willing to change certain aspects of your routine

No matter the routine, it is imperative that you treat yourself well and pay attention to your mind and body. Day trading can be a destructive career if you don’t.

Parting Thoughts on How to Start a Trading Business

We hope this has helped you gain a proper understanding of what it takes to run a day trading business. While many different factors can affect the success of a new business, giving yourself the best chance of success from the outset can make a huge difference. Take great care that you don’t embark on this journey lightly. Treat it with utmost respect and diligence, just as you would any other endeavor as an entrepreneur. And if we can help you along the way, please reach out to us. We wish you the best!

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Trading Plan Template & Examples: Step-by-Step Guide to Creating a Solid Trading Plan

Bonus Material:

Trading plans are an important part of any trader’s toolkit. The problem is, most traders don’t actively lay out a plan before they begin trading.

The result? They lose money and wonder why . Furthermore, many traders don’t know how to create a trading plan , or what to include.

Successful traders understand that trading plans are crucial to profiting consistently. In this article, I’ll walk you through creating your own plan, step-by-step, plus you can get a head start by using my free trading plan template, download below :

What is a trading plan?

A trading plan is an integral part of a trader’s strategy, outlining how trades are executed. It establishes rules for buying and selling securities, position sizing, risk management, and tradable securities. By following this plan, traders maintain discipline, consistency, and leverage proven strategies.

Why you should create a trading plan

Ask a new trader what they intend to do before the trading day and then ask them what they did at the end of the day. They almost certainly didn’t follow their plan. 

Trading plans are there for us to follow. Trading plans mean we take trades that are consistent with our rules and risk, and it means we remove a lot of emotion and discretion . This is important because humans are not rational agents and outsourcing this work means we can achieve a better P&L and make more money. 

A trading plan should resemble a business plan. A trader’s capital is their business and so we need to include everything that might be useful, but it should always cover the below.

What to include in your trading plan

• The time required to spend on your trading

Your trading goals and targets

• Your risk tolerance and risk management rules

Available capital for trading

Specific markets you wish to trade, the trading strategies you’ll use, your motivation for trading.

Read more information on what to include in your trading plan (with examples) below, and download your free template here:

The time required for trading

We need to define the time we need in order to trade successfully. For example, if you’re in full-time employment, then it’s unrealistic to spend six hours a day trading the market.

For example: Here is a part of my trading plan…

“To trade the UK stock market on a full-time basis I realistically need to spend at least 8-10 hours per day in order to take advantage of intraday opportunities and manage open positions in real time”.

It’s important to set realistic targets in trading. Once you have a target, you can reverse engineer how to achieve it.

For example: A target of increasing a trading account by 20% is an achievable target. To do that, we need to look at our trading capital and work out which trading strategies we’ll use.

Using breakouts to trend follow is a strategy I have had much success with, and I explain how I do this in my guide to breakouts.

There are several trading styles:

• Swing trading: This is a common strategy that attempts to capture moves over several days or weeks. Swing traders look for shorter term trends and then move onto the next trade.
• Momentum trading: This is a trend-following strategy based on upward movement and momentum. It can be a successful strategy over months and years as the stock continues to move higher. This is often coupled with increasing fundamental strength and accelerating earnings.
• Scalping or intraday trading (also known as ‘day trading’): Intraday strategies refer to trades placed and closed within the same trading session. 

Your risk tolerance and risk management rules 

Risk management is the most important part of trading. Position sizing is the first and last line of defence in our trading accounts.

If you take position sizes with 20% of your account, then that means you are risking 100% of that position every time it is risked in the market. Even if the chances are 99%, then eventually that 1 in 100 chance of the stock going to 0p and losing 100% of the position will happen.

Whilst a 20% drawdown on the trading account isn’t fatal, the law of compounding means that we will now need to gain 25% of our account just to get back to where we started. 

Never underestimate the numbers here – a 33% drawdown requires a near 50% gain just to get back to where we started. 

It’s important to put in place risk management rules that will protect the account and prevent us from taking on too much risk.

Only you will know how much risk you’re willing to take, but if you put yourself in a position where you could do yourself material damage, then eventually that outcome will be presented.

If taking a loss hurts, then it means you are trading too large. Most traders blow their accounts due to overexposure. I’ve never heard of a single trader who blew their account due to continuously taking small losses. Position sizing and risk management is covered in detail in my trading handbook.

Download the free ebook now

Enter your email to receive my free UK stock trading handbook, packed with professional techniques to manage risk and consistently profit on AIM stocks.

Traders should always be clear about what money should be used for trading and what money should stay in their bank accounts. 

Far too many traders have drawdowns in their trading accounts and decide to top up their account with a bank transfer.

Unfortunately, they end up putting far too much money into their account and do not keep track of their losses.

You should never trade with money you can’t afford to lose. I’ve had emails from people asking me what to do because they’ve lost the deposit for their house and they haven’t told their partner. Sadly, there is little that can be done at that point because the money is already lost.

In your trading plan you should be clear about how much is going into your trading account and how much you will top this up each month if that is going to be your strategy to grow your account further. 

However, the best way of growing your trading account is by making money trading successfully in the market. Once you can consistently do this, then it makes sense to increase your funds and scale up. 

A trading plan should also include the specific markets you wish to trade. Do you plan on trading UK stocks, US stocks, foreign exchange (forex), or cryptocurrencies? Once you’ve picked a market, you still need to drill deeper. 

For example: If you pick UK stocks will you trade all of these, or just AIM, or just the Main Market? Will you trade only small cap stocks? Will you trade both SETS and the SETSqx platforms ? 

In my case, I trade all UK stocks, and don’t discriminate between any of them. However, my focus is on smaller stocks under £500 million market cap. 

Your trading strategies are the ways you are going to make money. This part of the trading plan is important because by defining your strategies it will be clear to follow.

For example: I want to trade small-cap stocks that have momentum behind them, and I will find this momentum through technical breakouts and positive RNS announcements.

I will trade gaps and also place orders into the auctions in order to get better fills. I will use various brokers for different types of execution. I will take secondary raises that have news catalysts that can potentially drive the shares higher.

What is your why? What are your goals, and what is your motivation? Trading is hard and there are ups and downs – it’s easy to motivate yourself when the going is good and you’re making lots of money. But it can be harder when you’re suffered several losses in a row, and you keep seeing your account grind lower or flat for weeks on end. 

Writing down your why will make it easier to stay focused and commit to the long-term process and improvement.

For example:

• I want to trade because I enjoy the challenge and I also want to be my own boss.
• I want the freedom that comes with the lifestyle of a full time trader and I want to be around my wife and future children as they grow up.
• I want to offer my family a better life, and by continuing to work on my skillset is putting me closing towards my goals.

Good trading plan example

How do you write a trading plan?

• Know your trading playbook
• Manage your risk 
• Have a realistic profit target

1. Know your trading playbook

You should have a playbook of trades that you know how to execute in the market. A playbook is a list of trades, each with step-by-step instructions on how to trade the pattern. 

If you don’t know what you should trade in your trading plan then building a playbook of trades is a good place to start. 

2. Manage your risk

Risk management is a crucial skill for any trader. I’ve written an in-depth article on trading risk management for further information.

The reason risk management is so important is that without it we would blow up our accounts. Nobody would think about driving a car with no brakes because it would obviously crash – risk management is the brakes and safety system for our trading accounts.

Everyone has different risk profiles. Some are happy to take on high amounts of risk accepting that they may take hefty losses in order for the possibility of excess return. 

Full-time traders like myself tend to be more cautious knowing that if they lose too much capital, they may have to go back to work. 

You should include in your trading plan how much you’re prepared to risk on particular trades in your playbook and how much in your account overall.

3. Have a realistic profit target

Having an idea of a profit target will mean that you don’t end up falling into the trap of never selling. Far too many traders watch a stock rise, see it pullback, then immediately regret not nailing down profit into strength.

By setting out clear take profit targets this avoids indecisiveness and will ensure you execute ruthlessly. 

Bonus tip: Trade the stocks in play

Trading is about being in stocks that are moving. Volatility is the lifeblood of a trader, and a dead stock means dead money. 

The stocks ‘in play’ are the stocks that have moved or are moving in recent sessions, and the stocks we should be immediately keeping tabs on. Stocks can cycle in and out being in play, and so we need to keep track of those that offer the greatest volatility to trade.  

Download my free one-page trading plan template

My opening plan trading template has everything you need to begin the trading day. It forces you to check and review your open positions, so you’re always knowing what to do. 

It also suggests to list the current stocks in play, and how you can trade them, and in what size. Additionally, it asks “What can happen?” so a trader using this template will never be caught out.

By thinking ahead about potential scenarios and how to trade them, this gives the trader an advantage over others who do not put the work in. Traders who punt around their money without a clue or a plan are commonly referred to as “liquidity”.

To download the free template, click the button below and follow the instructions.

About The Author

Michael taylor.

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NerdWallet, Inc. is an independent publisher and comparison service, not an investment advisor. Its articles, interactive tools and other content are provided to you for free, as self-help tools and for informational purposes only. They are not intended to provide investment advice. NerdWallet does not and cannot guarantee the accuracy or applicability of any information in regard to your individual circumstances. Examples are hypothetical, and we encourage you to seek personalized advice from qualified professionals regarding specific investment issues. Our estimates are based on past market performance, and past performance is not a guarantee of future performance.

We believe everyone should be able to make financial decisions with confidence. And while our site doesn’t feature every company or financial product available on the market, we’re proud that the guidance we offer, the information we provide and the tools we create are objective, independent, straightforward — and free.

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Stock Market Basics: What Beginner Investors Should Know

Many or all of the products featured here are from our partners who compensate us. This influences which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here's how we make money .

The investing information provided on this page is for educational purposes only. NerdWallet, Inc. does not offer advisory or brokerage services, nor does it recommend or advise investors to buy or sell particular stocks, securities or other investments.

Stocks represent shares of ownership in a company, and are listed for sale on a specific exchange. Exchanges track the supply and demand — and directly related, the price — of each stock. They also bring buyers and sellers together and act as a market for the shares of those companies. The stock market is made up of exchanges, such as the New York Stock Exchange and the Nasdaq.

When you go to "invest in the stock market," you're not purchasing a piece of the stock market itself; you're purchasing stocks that are listed on those exchanges that make up the stock market.

» Need to back up a bit? Read our explainer about stocks .

Individual traders are typically represented by brokers — these days, that’s often an online broker. You place your stock trades through the broker, which then deals with the exchange on your behalf.

The NYSE and the Nasdaq are open from 9:30 a.m. to 4 p.m. Eastern. If those hours don't work for you, some brokers do offer premarket and after-hours trading sessions.

When you get started, stock trading information can sound like gibberish. But if you’re investing long term — with, say, a 401(k) or IRA geared toward retirement — you can get by just fine without understanding the stock market much at all, as long as you figure out how much you need to invest for retirement .

If, on the other hand, you want to learn how to trade stocks, you do need to understand the stock market, and at least some basic information about how stock trading works.

» Learn more: How to invest in stocks

Understanding the stock market

When people refer to the stock market being up or down, they’re generally referring to one of the major market indexes.

A market index tracks the performance of a group of stocks, which either represents the market as a whole or a specific sector of the market, like technology or retail companies. You’re likely to hear most about the S&P 500 , the Nasdaq composite and the Dow Jones Industrial Average; they are often used as proxies for the performance of the overall market. On May 15, 2024, for instance, the S&P 500, Dow Jones and Nasdaq rose to new record highs.

Investors use indexes to benchmark the performance of their own portfolios and, in some cases, to inform their stock trading decisions. You can also invest in an entire index through an index fund or exchange-traded fund, or ETF , which usually tracks a specific index or sector of the market.

» Learn more: How the market works

Stock trading information

Most investors would be well-advised to build a diversified portfolio of stocks or stock index funds and hold onto it through good times and bad.

But investors who like a little more action engage in stock trading . Stock trading involves buying and selling stocks frequently in an attempt to time the market.

The goal of stock traders is to capitalize on short-term market events to sell stocks for a profit, or buy stocks at a low. Some stock traders are day traders, which means they buy and sell several times throughout the day. Others are simply active traders, placing a dozen or more trades per month. (Interested in individual stocks? View our list of the best-performing stocks this year .)

Investors who trade stocks do extensive research, often devoting hours a day to following the market. They rely on technical stock analysis , using tools to chart a stock's movements in an attempt to find trading opportunities and trends. Many online brokers offer stock trading information, including analyst reports, stock research and charting tools. (Learn the basics of how to read stock charts .)

» Learn more about stock trading vs. investing

Bull markets vs. bear markets

Neither is an animal you’d want to run into on a hike, but the market has picked the bear as the true symbol of fear: A bear market means stock prices are falling — thresholds vary, but generally to the tune of 20% or more — across several of the indexes referenced earlier.

Bull markets are followed by bear markets, and vice versa, with both often signaling the start of larger economic patterns. In other words, a bull market typically means investors are confident, which indicates economic growth. A bear market shows investors are pulling back, indicating the economy may do so as well.

The good news is that the average bull market far outlasts the average bear market, which is why over the long term you can grow your money by investing in stocks.

The S&P 500, which holds about 500 of the largest stocks in the U.S., entered bull market territory in October 2022 following a bear market that started in June of that year. The index saw a massive recovery in 2023 and hit a fresh all-time high in May 2024.

But the index has historically returned an average of about 7% annually , when you factor in reinvested dividends and adjust for inflation. That means if you invested $1,000 30 years ago, you could have about $7,600 today. (Explore this further with NerdWallet's investment calculator .)

Stock market crash vs. correction

A stock market correction happens when the stock market drops by 10% or more. A stock market crash is a sudden, very sharp drop in stock prices, like in early 2020, around the beginning of the COVID-19 pandemic.

While crashes can herald a bear market, remember what we mentioned above: Most bull markets last longer than bear markets — which means stock markets tend to rise in value over time. In 2020, the market was back to hitting record highs by August.

If you're worried about a crash, it helps to focus on the long term. When the stock market declines, it can be difficult to watch your portfolio’s value shrink in real time and do nothing about it. However, if you’re investing for the long term, doing nothing is often the best course.

Why? Because when you sell investments in a downturn, you lock in your losses. If you plan to re-enter the market at a sunnier time, you’ll almost certainly pay more for the privilege and sacrifice part (if not all) of the gains from the rebound.

The importance of diversification

You can’t avoid bear markets as an investor. What you can avoid is the risk that comes from an undiversified portfolio.

Diversification helps protect your portfolio from inevitable market setbacks. If you throw all of your money into one company, you’re banking on success that can quickly be halted by regulatory issues, poor leadership or an E. coli outbreak.

To smooth out that company-specific risk, investors diversify by pooling multiple types of stocks together, balancing out the inevitable losers and eliminating the risk that one company’s contaminated beef will wipe out your entire portfolio.

But building a diversified portfolio of individual stocks takes a lot of time, patience and research. The alternative is a mutual fund, the aforementioned exchange-traded fund or an index fund. These hold a basket of investments, so you’re automatically diversified. An S&P 500 index fund, for example, would aim to mirror the performance of the S&P 500 by investing in the 500 companies in that index.

» Check out our full list of the best ETFs

The good news is you can combine individual stocks and funds in a single portfolio. One suggestion: Dedicate 10% or less of your portfolio to selecting a few stocks you believe in, and put the rest into index funds.

» Ready to get started? See our analysis of the best stockbrokers for beginners

On a similar note...

Find a better broker

View NerdWallet's picks for the best brokers.

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Business Ideas

How to Start a Stock Trading Business: A Step-by-Step Guide

By Jacob Maslow

December 27, 2022

Are you ready to take the plunge and start a stock trading business? It can be an intimidating venture, but it’s possible with the proper knowledge and resources. To draw customers in, a thriving stock trading business requires careful planning, strategy development, risk management strategies, and marketing tactics. Before starting your own business, you must consider licensing requirements along with technology platforms to help maximize profits. Here we’ll cover all of these topics so that everything is prepared for success when you decide to start a stock trading business!

Table of Contents:

• What does a stock trading business do

SWOT Analysis of a Stock Trading Business

Franchise opportunities, business plan, federal licensing requirements, state licensing requirements, professional certifications.

• Technology & Platforms

Risk Management Strategies

Marketing strategies, operating tips for a successful stock trading business, catchy and creative names for a stock trading business, can i start a business to trade stocks, how much money do you need to start a trading business, should i start an llc for day trading, how do i start my own day trading business, what does a stock trading business do.

A stock trading business is an investment firm that buys and sells stocks on behalf of its clients. The primary goal of a stock trading business is to generate profits for its clients by buying and selling stocks at the right time to maximize returns. Day-to-day operations involve researching potential investments, monitoring market trends, executing trades, managing portfolios, and advising clients. Stock traders must have a deep understanding of financial markets and the ability to make quick decisions based on their analysis. They also need strong communication skills to explain their strategies and guide their clients.

A SWOT analysis is a valuable tool for any business, and stock trading businesses are no exception. A SWOT analysis looks at the Strengths, Weaknesses, Opportunities, and Threats of a business. It helps to identify areas where improvements can be made, or new opportunities can be taken advantage of. All these aspects should be considered before deciding whether setting up your own stock trading business is something you wish to pursue further. Geopolitical events that may impact global economies and microeconomic factors, such as changes in regulations affecting individual companies’ performance, are potential threats that must always be considered before taking action. Additionally, opportunities exist through leveraging technology, such as algorithmic trading systems, allowing users more flexibility when entering and exiting positions. Lastly, weaknesses may include a lack of experience or knowledge within particular asset classes or sectors, which could lead investors to make costly mistakes. A stock trading business is a great way to make money, but it also comes with risks. A SWOT Analysis can help you identify this type of business’s strengths, weaknesses, opportunities, and threats. Strengths : The strengths of a stock trading business include having access to reliable financial data, an understanding of market trends, and making informed decisions about investments. Additionally, having good relationships with brokers and other traders can help increase profits by providing insider information or access to better deals. Weaknesses : The weaknesses in this type of business may include a lack of experience in the markets or a lack of knowledge about different types of investments. In addition, not keeping up with current events could lead to missed opportunities or losses due to bad timing on trades. Finally, there is always the risk that one’s strategies will fail due to unforeseen circumstances, such as changes in government regulations or economic conditions. Opportunities : There are many opportunities available for those who choose to pursue stock trading as a career path, including diversifying portfolios across multiple asset classes like stocks, bonds, and commodities; taking advantage of tax benefits; leveraging technology platforms; and staying abreast on news-related topics that affect the markets such as political developments or natural disasters which may have an impact on specific sectors/industries/companies, etc. Threats: The threats associated with stock trading include market volatility, the risk of fraud and manipulation, and potential losses due to bad decisions or incorrect timing. Additionally, external factors can always affect performance, such as changes in government regulation, economic conditions, or geopolitical developments. It is essential to monitor these elements to remain competitive and successful constantly. Geopolitical events that may impact global economies and microeconomic factors, such as changes in regulations affecting individual companies’ performance, are potential threats that must always be considered before taking action. Having a thorough understanding of the strengths, weaknesses, opportunities, and threats of stock trading can help entrepreneurs make informed decisions when considering starting their businesses. Moving on to Franchise Opportunities, let’s explore the options available for entrepreneurs looking to get into the stock trading industry.

Franchising is a great way to get into the stock trading business without starting from scratch. By joining an established franchise, you can benefit from its brand recognition and marketing efforts while still being able to run your own business. One of the main advantages of franchising is that it allows entrepreneurs to enter the market with minimal risk and cost. Franchisors provide comprehensive training programs, ongoing support, and access to their resources which can help new businesses get off the ground quickly. Additionally, they often have existing customer bases that make it easier for franchises to generate revenue faster than starting from scratch. However, there are some drawbacks associated with franchising as well. For example, franchisees must pay royalties or fees back to the franchisor in exchange for using their name and resources. This means that profits may be lower than if you started your independent business venture since part of those profits will pay these fees or royalties back each month or year, depending on your agreement with them. Additionally, many franchises require owners to adhere strictly to specific rules, such as operating hours or product offerings which can limit creativity when running a business within this framework. It is essential to research all aspects before deciding which one best suits your needs as an entrepreneur looking to break into the stock trading industry through the franchising opportunities available today. Popular stock trading franchises include Charles Schwab & Co., TD Ameritrade Holding Corporation (AMTD), E*TRADE Financial Corporation (ETFC), Interactive Brokers Group Inc., TradeStation Group Inc., Ally Invest Securities LLC (ALLY), and Robinhood Markets Inc.. Each has its unique set of features, so it is essential to research various options available to understand what each one offers before making any decisions about investing in one option. Franchise opportunities offer a great way to start a stock trading business, but creating a detailed business plan that outlines your goals and strategies is essential.

Business plans are essential, especially when starting a stock trading business. A comprehensive plan should include financial projections, marketing strategies, and operational plans. Financial Projections : Financial projections should include the expected start-up costs of the business as well as estimated revenue and expenses over time. This will help you determine how much capital is needed to get started and if your venture is viable in the long run. Marketing Strategies : Developing an effective marketing strategy is key to success in any industry, especially in stock trading. You need to identify who your target audience is and what tactics you’ll use to reach them. Consider using social media platforms such as Twitter or LinkedIn to promote your services or creating educational content on YouTube that can be shared with potential customers. Operational Plans : Outline how you will manage day-to-day operations, including hiring staff, setting up office space, managing customer relationships, etc. Be sure to consider all aspects of running a successful business, from accounting practices to legal requirements, so everything runs smoothly once you open for business. Popular online brokers also offer their proprietary platforms, which allow users access to powerful charting capabilities, streaming news feeds, and advanced order types such as limit orders or stop losses orders. These features provide more control over trades than traditional market orders, allowing traders to make informed decisions quickly and accurately. Creating a comprehensive business plan is essential to ensure that your stock trading business will be successful. With the right plan, you can move forward with licensing requirements and other steps necessary for launching your business.

Licensing Requirements

The first step to starting a stock trading business is obtaining the necessary federal licensing. Depending on the type of stock trading you plan to do, you may need to obtain either a broker-dealer license or an investment adviser license from the U.S. Securities and Exchange Commission (SEC). A broker-dealer license allows you to buy and sell securities for your account and clients. In contrast, an investment adviser license permits you to advise about investments but not trade them. Both licenses require extensive paperwork and background checks before the SEC can grant them.

In addition to federal licensing requirements, many states also have regulations to follow for a stock trading business to operate legally within their borders. These state laws vary widely depending on where your business is located, so you must research what specific rules apply in your area before starting any stock trading activity. Generally speaking, most states will require some form of registration or permit for a company offering financial services such as stock trading to do business there legally.

Suppose you plan on dealing with penny stocks. In that case, you and any employees involved will likely need special certification from FINRA (the Financial Industry Regulatory Authority) before engaging in those trades with customers or clients. Similarly, if derivatives are part of your product offerings, specialized certifications may also be needed depending on which jurisdiction governs those transactions. Licensing requirements vary by country and state, so it’s essential to research the legalities of starting a stock trading business in your area. Now let’s look at the technology and platforms needed for this venture.

Technology & Platforms

When it comes to running a successful stock trading business, technology and platforms are essential. The right software programs and online brokers can make all the difference in executing trades quickly and accurately. Software Programs : A reliable stock trading platform is necessary for any serious trader. Many software programs are available, from free versions with basic features to more sophisticated paid options offering advanced analytics tools and charting capabilities. It’s essential to find a program that meets your needs and is easy to use, so you don’t waste time trying to figure out how it works. Online Brokers : An online broker is another critical component of a successful stock trading business. These services provide market access and research tools such as real-time quotes, charts, news feeds, analyst ratings, etc., which can help traders make informed decisions about their investments. When choosing an online broker, be sure to look at factors such as fees (commissions), customer service availability (especially if you plan on making frequent trades), account minimums/maximums (if applicable) and security measures in place for protecting your funds from fraud or theft. Trading Platforms : Trading platforms are web-based applications that allow users to trade stocks directly from their computer or mobile device without going through an intermediary like an online broker or financial advisor. Many of these platforms offer additional features, such as portfolio management tools and automated trading strategies designed specifically for active traders who want more control over their investments than traditional brokers typically provide. Research Tools : Research tools are invaluable for analyzing potential investments before buying or selling them in the market – they can help identify trends in price movements over time, so you know when might be the best time to buy/sell certain stocks based on past performance data alone. Some popular research tools include fundamental analysis websites like Yahoo Finance & Google Finance; technical analysis sites like StockCharts & Finviz; social media sentiment trackers like StockTwits & Twitter; plus other specialized services depending on your specific needs (e.g., industry reports). Overall, having access to the right technology and platforms is essential for any aspiring stock trader looking to maximize profits while minimizing risk exposure in today’s highly competitive marketplace. Technology & Platforms are essential to any stock trading business, and understanding the available options is key to success. Next, we’ll explore risk management strategies for traders.

Risk management is an essential part of stock trading. It involves identifying, assessing, and prioritizing risks to minimize their impact on a business. Risk management strategies help traders protect their investments from losses due to market volatility or unexpected events. Stop-Loss Orders : Stop-loss orders are one of stock traders’ most prevalent risk management strategies. This type of order instructs a broker to sell a security when it reaches a certain price level to limit potential losses. For example, if you bought shares at $50 each and set a stop-loss order at $45, your broker would automatically sell the shares once they reach that price point so you don’t lose more money than you intended. Diversification : Diversification is another important risk management strategy for stock traders. This involves spreading investments across different assets, such as stocks, bonds, mutual funds, commodities, and currencies, to reduce overall risk exposure and maximize returns over time. By diversifying your portfolio with different asset classes and sectors, you can mitigate some risks associated with investing in just one type of security or industry sector. Hedging Strategies : Hedging strategies involve taking offsetting positions in two different securities that move opposite each other in value so that any gains made on one position will be offset by losses on the other position thus reducing overall risk exposure for investors who use this technique correctly. For example, if an investor buys 100 shares of company A at $10 per share, he/she could also buy put options (which give them the right but not obligation) to sell those same 100 shares at $9 per share . If company A’s share prices fall below $9, they will make money from selling those shares through their put option while losing money on their original purchase. However, if Company A’s share prices rise above $9, they will lose money from exercising their put option but still make money from their original purchase. Additionally, these tools can provide insight into how much volatility may exist within specific markets, which helps inform decisions about how much capital should be allocated toward particular trades and what kind of stops should be placed accordingly. This information can help investors make informed decisions regarding their risk management strategy. Risk management strategies are essential for any business, and taking the time to consider them before starting a stock trading business is crucial. Now let’s look at some marketing strategies to help you get your new venture.

Marketing a stock trading business is essential for success. There are many different methods to reach potential customers and build brand awareness. Social Media: Social media can be used to create engaging content that will draw in new customers. Platforms such as Facebook, Twitter, Instagram, and LinkedIn offer excellent opportunities to share information about the business with followers and engage in conversations with them. It’s important to keep posts professional and engaging so people will want to follow the page or account. Search Engine Optimization (SEO) : SEO helps increase visibility on search engines like Google by using specific keywords related to the stock trading business in website content and blog posts. This increases organic traffic from potential customers who may not have known about the company before seeing it on a search engine results page (SERP). Email Marketing: Email marketing is an effective way of reaching out directly to potential clients with updates about products or services offered by the stock trading business. Creating newsletters or email campaigns allows businesses to target their audience more precisely than other forms of advertising while providing valuable information at no cost other than time spent creating emails and sending them out regularly. Content Marketing : Content marketing involves creating high-quality content related to investing topics that can be shared across multiple platforms, including social media, blogs, websites, etc., and through paid advertisements, if desired. This type of marketing helps establish trust between companies and their target audiences while increasing brand recognition over time when done consistently. Advertising : Advertising can be done online through various channels such as Google Ads or Facebook Ads; or offline through print ads in newspapers/magazines/etc., radio spots, television commercials, etc.. The goal here is typically either direct sales generation from ads placed on popular sites where people already shop for investments; or brand building via exposure on larger networks where viewers may not necessarily purchase anything right away but become familiar with your company name over time due to repeated viewing/listening/reading of your ad(s). Word-of-mouth referrals are one of the most potent forms of advertising available today. They come from trusted sources such as friends and family members who have likely had positive experiences working with you. These individuals can then recommend you to others looking for similar services within their network circles, making this advertising highly effective. Marketing strategies are vital in gaining visibility and building a customer base for any business, including stock trading. To ensure success in the industry, it is essential to understand the operating tips for running a successful stock trading business.

1. Research : It is essential to do thorough research before starting a stock trading business. This includes researching the markets, understanding the types of stocks and investments available, and learning about the risks associated with each type of investment. 2. Capital: Sufficient capital is essential for any business venture, especially for stock trading businesses. A trader should have enough money to cover all potential losses during trades. 3. Trading Platforms : Choosing an appropriate platform for your trading needs is key to success in this field. Different platforms offer different features and tools that traders can use depending on their individual preferences and goals when investing in stocks or other financial instruments such as options or futures contracts etc.. 4. Risk Management Strategies : Risk management strategies are necessary for successful stock trading businesses since they help minimize losses while maximizing profits from trades made over time through careful planning and execution of these strategies based on market conditions at any given period. 5. Discipline & Patience : Discipline and patience are two qualities that every trader must possess if they want to succeed in this field because, without them, even the best-laid plans will not work out due to lack of consistency in following those plans over long periods which could lead to large losses instead of gains from investments made into various securities traded within markets around the world. 6 Set Goals & Objectives : Setting realistic goals and objectives helps keep traders focused on what they need to achieve so that they don’t get distracted by short-term fluctuations within markets or take unnecessary risks with their capital just because they feel like taking chances without considering potential consequences first. Monitoring markets closely allows traders to stay up-to-date with changes across various asset classes, enabling them to make informed decisions at appropriate times rather than relying solely on intuition or gut feeling. Following the operating tips outlined in this article gives you a strong foundation to start and run your stock trading business successfully. Now let’s explore some catchy and creative names for your business!

A catchy and creative name for your stock trading business is essential to success. A good name will help you stand out from the competition, attract customers, and create a memorable brand. It should be easy to pronounce and spell and evoke positive associations with your business. Here are some examples of great names for stock trading businesses (additional sample names and slogans are on the bottom of the article): 1. TradeMasters – This clever play on words implies stock trading expertise while being short and snappy. 2. MarketRiders – The combination of “market” and “riders” suggests that this company can easily navigate through financial markets. 3. StockBrokersX – The X at the end gives this name an edgy feel that could appeal to younger investors who want something different than traditional brokerages offer them. 4. WallStreeters – This alliterative name evokes images of Wall Street traders working hard behind the scenes to make money for their clients while also having fun doing it! 5 . StockJockeys -This playful take on jockeys racing horses implies speediness when executing trades quickly to get maximum returns for clients or themselves if they’re day-trading stocks themselves! 6 .TradersUnited -The word “united” implies solidarity among traders who work together towards common goals such as making profits by taking advantage of market fluctuations or diversifying portfolios across multiple asset classes like bonds, commodities etc.. 7. BrokeragePlus – This name implies that this company offers more than just brokerage services, like financial planning or investing advice. 8. WealthGurus -This word pairing encapsulates the idea of wealth created from stock trading and suggests expertise in the field using “guru.” 9. StockGeniuses – This implies an almost superhuman level of intelligence about stock trading. 10. MarketMavens – This suggests that this company has the knowledge and experience to guide their clients into profitable markets. 11. SharePros -The combination of “share” and “pro” implies professionalism when providing stock trading services. 12. Investify -This name combines the words “invest” and “simplify”, suggesting that they make investing easy for customers. 13. ProfitSeekers – This name is self-explanatory, as it implies that the business helps its clients find profits by trading stocks or other financial instruments such as futures or options. 14. TradeMoguls -This implies that the company has a team of experts who are knowledgeable in stock trading and can provide guidance to customers on how to get the best returns from their investments. 15. E-Traders – This name reflects the modern-day world, as it suggests that this business offers online stock trading services. These names reflect creativity and professionalism for any budding stock trader looking to make a mark in the industry. By picking a catchy and creative name for your business, you will be more likely to stand out amongst your peers and attract more customers. It is important to remember that when selecting a name for your business, it should be easy to read and pronounce so that potential clients have no difficulty recognizing it. Additionally, pick a name that reflects your business goals and values so you can get the most out of your branding efforts.

Yes, you can start a business to trade stocks. You will need to obtain the licenses and registrations required by your local government to operate as a stock trader legally. Additionally, you should be knowledgeable about financial markets and trading strategies to maximize profits from your trades. Finally, you may want to consider using an online broker or other third-party services for assistance with research and execution of trades.

The amount of money needed to start a trading business depends on the type of trading you plan to do. For example, if you are looking to trade stocks and other securities, you will need at least $25,000 in capital. On the other hand, if you are planning to trade commodities or currencies, you may need more than $100,000 in capital. Additionally, it is essential to consider fees associated with setting up an account and any applicable taxes when calculating your budget for starting a trading business.

It is generally recommended to form an LLC for day trading. An LLC provides limited liability protection, which can help protect your assets from any legal or financial issues arising from your business activities. Additionally, forming an LLC allows you to separate your personal and business finances, making it easier to track expenses and income related to the day trading business. Ultimately, forming an LLC will provide more security for you and your business in the long run.

Starting a day trading business requires careful planning and research. You must first decide which markets you want to trade in, such as stocks, options, futures, or currencies. Then you need to open an account with a broker that offers the products you wish to trade. After this is done, it’s essential to develop a trading strategy that works for your goals and risk tolerance level. Finally, practice with paper trades before risking real money in the market. With dedication and discipline, success can be achieved through day trading!

Starting a stock trading business can be rewarding and profitable, but it requires careful planning and research. You must consider the SWOT analysis of your business, understand the licensing requirements, choose the right technology platforms, develop risk management strategies, create effective marketing plans and come up with catchy names for your business. By following these steps, you will have taken an essential step towards starting a successful stock trading business. With dedication and hard work, you can become one of the many entrepreneurs making money from stock trading businesses today. Are you ready to take the plunge into starting a stock trading business? It can be intimidating and overwhelming, but it’s possible with careful planning and preparation. From finding an online broker that suits your needs to understand the basics of investing, plenty of resources are available to get started. Don’t wait any longer – start taking steps today toward launching your successful stock trading business!

300 Names and Slogans for a Stock Trading Businesses

Cute Girly Names and Slogans

101. MoneyCuties – “Look Like a Million Bucks” 102. InvestmentBabes -“Watch our Profits Grow” 103. CapitalChicks – “Seeing a Return on Your Investment” 104. ProfitPrincesses -“Achieving Financial Goals in Style!” 105 .ShareSultans – “Making Money Move with Us” 106. EquityGoddesses -“Unlocking the Secrets of Successful Investing” 107. TradeDarlings – “Creating Wealth With Our Strategies” 108. MarketQueens -“Ruling Over Markets Everywhere!” 109 .ReturnDivas – “Getting the Most Out of Your Investments” 110. WealthVixens -“Maximizing Potential Returns Today!” 111. ProfitLadies – “Investing for Success” 112. AssetSweeties -“Building Value With Our Strategies” 113 .ValueBabes – “High Returns with Low Risk” 114. TraderKittens -“Making Profits Purr!” 115 .MarketGals – “Beating the Markets at Their Own Game” 116. MoneyMavens -“Reaching Financial Goals Together!” 117 .InvestmentFoxes – “Getting Ahead in the Investment Game” 118. ReturnBellees -“An Investment Fairy-Tale Come True!” 119. ProfitFemmes – “Achieving Maximum Results With Minimum Effort” 120. EquityGurus -“Experts at Growing Your Wealth!” 121. TradeDazzlers – “Making Trades Shine” 122. MarketVixens -“Captivating Markets Everywhere!” 123. WealthButterflies – “Bringing in the Returns” 124. ProfitGoddesses -“Creating Financial Abundance Now!” 125 .AssetLoves – “Watching Your Assets Flourish” 126 .ValuePrincesses -“Unlocking Maximum Returns in Style!” 127 .TraderChicks – “Crafting Successful Trading Strategies” 128. MarketQueens -“Ruling Over Markets Everywhere!” 129. MoneyMuses – “Inspiring Financial Freedom” 130. InvestmentDarlings -“Delivering the Goods with Our Trades” 131 .CapitalDivas – “Making Your Funds Grow” 132. ProfitCuties -“Harnessing Market Forces for Profits!” 133 .ShareGoddesses – “Unlocking the Profits of Shares” 134. EquityLadies -“Maximizing Returns on Equity Investments” 135. TradeVixens – “Reaching New Heights With Our Expertise” 136. MarketButterflies -“Captivating Markets Everywhere!” 137 .ReturnProphets – “Forecasting Successful Investing Strategies” 138. WealthFoxes -“Generating Profits with Our Expertise!” 139 .ProfitSultans – “Creating Abundance in the Markets” 140. AssetMavens -“Maximizing Assets for Maximum Returns” 141. ValueQueens – “Achieving Maximum Results With Minimum Effort” 142. TraderLoves -“Making Trading Successful and Fun!” 143 .MarketDivas – “Beating the Markets at Their Own Game” 144. MoneyMasters -“Harnessing Financial Freedom Together!” 145 .InvestmentGurus – “Leaders of the Investment Arena” 146. CapitalPrincesses -“Investing for Maximum Returns!” 147 .ProfitBabes – “Seeing a Return on Your Investment” 148. ShareDazzlers -“Making Money Move with Us!” 149. EquityFoxes – “Getting Ahead in the Investment Game” 150. TradeTemptresses -“Unlocking Potential Profits Through Trades!” 151. MarketGoddesses – “Harnessing Market Forces for Profits” 152. ReturnChicks -“Achieving Financial Goals in Style!” 153 .WealthSultans – “Creating Lasting Financial Wealth Together” 154. ProfitVixens -“Making Profits Purr!” 155 .AssetQueens – “Building Value With Our Strategies” 156. ValueMavens -“Unlocking Maximum Returns in Style!” 157. TraderPrincesses – “Crafting Successful Trading Strategies” 158. MarketDarlings -“Ruling Over Markets Everywhere!” 159 .MoneyGurus – “Inspiring Financial Freedom” 160. InvestmentBellees -“Delivering the Goods with Our Trades!” 161. CapitalButterflies – “Making Your Funds Grow” 162. ProfitFoxes -“Harnessing Market Forces for Profits!” 163 .ShareGals – “Unlocking the Profits of Shares”

Regional Names and slogans

164. Investment Divas of the North – “Making Wise Investments” 165. Money Mavens of the South -“Reaching Financial Goals Together” 166. Trader Kittens of the East – “Making Profits Purr” 167. Profit Ladies of the West -“Investing for Success!” 168 .Value Babes of the Midwest – “High Returns with Low Risk” 169. Market Gals of the Northeast -“Beating the Markets at Their Own Game” 170. Asset Sweeties of Canada – “Building Value With Our Strategies” 171. Return Belles of Mexico -“An Investment Fairy-Tale Come True!” 172. Equity Gurus of Europe – “Getting Ahead in the Investment Game” 173. Trade Dazzlers of Asia -“Making Money Move with Us!” 174. Wealth Queens of Africa – “Creating Lasting Financial Wealth Together” 175. Capital Darlings of Australia -“Achieving Financial Goals in Style!” 176 .Profit Vixens of South America – “Harnessing Market Forces for Profits” 177. Share Goddesses of the Caribbean -“Unlocking Potential Profits Through Trades!” 178. Market Mavens of the Middle East – “Captivating Markets Everywhere!” 179. Value Chicks Around the World -“Maximizing Returns on Equity Investments!” 180. Trader Butterflies Everywhere -“Making Trading Successful and Fun!” 181. Money Princesses Everywhere – “Maximizing Assets for Maximum Returns” 182. Investment Queens of the Universe -“Reaching New Heights With Our Expertise!” 183 .Capital Babes of All Times – “Forecasting Successful Investing Strategies” 184. Profit Dazzlers of Your Dreams -“Generating Profits with Our Expertise!” 185. Share Foxes of Your Future – “Creating Abundance in the Markets” 186. Equity Temptresses of Today -“Achieving Maximum Results With Minimum Effort!” 187. Market Sultans That Make It Happen – “Delivering the Goods with Our Trades!” 188. Value Vixens That Set the Standard -“Leaders of the Investment Arena!” 189. Trader Divas That Lead the Way – “Inspiring Financial Freedom” 190. Money Masters of Success -“Harnessing Financial Freedom Together!” 191. InvestmentGoddesses Who Make It Happen– “Unlocking Maximum Returns in Style!” 192. CapitalPrincesses That Take Control -“Making Profits Purr!” 193 .ProfitBabes Who Find Success – “Seeing a Return on Your Investment” 194. ShareDazzlers With Winning Strategies -“Ruling Over Markets Everywhere!” 195 .EquityButterflies With Unstoppable Momentum – “Crafting Successful Trading Strategies” 196. MarketChicks Who Make it Count -“Making Money Move with Us!” 197. ValueQueens Who Define the Future – “Building Value With Our Strategies” 198. TraderGurus Who Lead the Way -“Unlocking Potential Profits Through Trades!” 199. MoneyVixens Who Reach Their Goals – “Getting Ahead in the Investment Game” 200. InvestmentDarlings That Make It Happen -“Achieving Financial Goals in Style!” 201 .CapitalSweeties For Maximum Returns– “Creating Lasting Financial Wealth Together” 202. ProfitFoxes That Reach Maximum Success -“An Investment Fairy-Tale Come True!”

Alliterative Names

203. Profitable Portfolios: “Position Yourself for Profit” 204. Stock Solutions: “The Right Solution for Your Investment” 205. Capital Commissions: “Creating Capital for the Future” 206. Traders Trust: “Trust Us With Your Trades” 207. Market Managers: “Manage Your Money with Our Expertise” 208. Wise Investments: “Wisely Invest in Your Financial Future” 209. Smart Strategies: “Smart Strategies for Market Success” 210. Shareholder Success: “Shareholder Success, Start Today!” 211. Trendy Trades: “Trends in Trading, Trade with Us!” 212. Investing Insight: “Gain Insights into Your Investments” 213. Market Masters: “Be the Master of Your Markets” 214. Chart Checkers: “Check Charts for Profit Potential” 215. Investment Advantages: “Advantages for Every Investor” 216. Exchange Experts: “Experts in Exchanges and Profits” 217. Buyer’s Brokers: “Smart Brokering for Smart Buyers” 218. Trading Tactics: “Tactics for Maximum Trading Profits” 219. Financing Futures: “Financing Your Financial Futures” 220. Money Managers: “Manage Your Money Wisely With Us” 221. Stock Speculators: “Speculation For Maximum Gains” 222. Trade Trends: “Trading the Right Trends for Success” 223. Value Vanguards: “Secure Values with Our Strategies” 224. Profit Partnerships: “Partner With Us For Profit” 225. Asset Advisors: “Advice On Assets To Maximize Your Returns” 226. Cash Creators: “Creating Cash with Trades” 227. Investment Insiders: “Insider Knowledge for Investing Success” 228. Market Masters: “Master Markets and Maximize Your Profits” 229. Profit Pros: “Pros in the Profit Game” 230. Trading Titans: “Titanic Returns on Trades” 231. Wealth Warriors: “Warriors for Your Financial Futures” 232. Market Moguls: “Mogul Minds Making Markets Move” 233. Stock Strategists: “Strategize For Successful Stocks” 234. Profit Pioneers: “Pioneering Profits in the Trading Arena” 235. Exchange Experts: “Experts In Exchanges and Profits” 236. Investment Advisors: “Advisors For All Your Investing Needs” 237. Risk Rangers: “Minimizing Risk, Maximizing Return” 238. Trade Trailblazers: “Trailblazing Trades To Financial Freedom” 239. Shares Specialists: “Specialized Strategies For Shareholder Success” 240. Trading Titans: “Titanic Returns On Your Trades” 241. Profitable Partnerships: “Partner With Us For Profit” 242. Stock Savvy: “Savvy Strategies For Stock Success” 243. Market Markers: “Mark The Markets and Make Money” 244. Investment Intelligentsia: “Intelligence Is Key To Investing Successfully” 245. Financial Foresight: “Foresight Into Your Finances” 246. Wealth Wizards: “Wizardry In Wealth Management” 247. Shareholder Solutions: “Solutions To All Your Shareholder Worries” 248. Trading Titans: “Titanic Returns Through Trades” 249. Market Masters: “Masters Of The Markets For Maximum Gains” 250. Capital Commanders: “Commanding Capital In The Financial Arena” 251. Wealth Warriors: “Warriors For Your Financial Futures” 252. Cash Creators: “Creating Cash With Your Trades” 253. Profit Prophets: “Prophecies Of Profits Proven True” 254. Exchange Executives: “Executing Exchanges For Maximum Earnings” 255. Trade Trackers: “Tracking Trades To Profitable Returns” 256. Investment Insiders: “Insider Knowledge For Investing Success” 257. Financial Forecasters: “Forecasting Your Finances Into The Future” 258. Stock Strategists: “Strategize For Successful Stocks” 259. Profit Pros: “Pros In The Profit Game” 260. Chart Checkers: “Check Charts For Increased Returns” 261. Value Visionaries:”Visionary Values in Trading” 262. Portfolio Planners: “Planning Your Portfolio for Maximum Profit” 263. Trade Trailblazers: “Trailblazing Trades To Financial Freedom” 264. Asset Advisors: “Advice On Assets To Maximize Your Returns” 265. Investment Intelligentsia: “Intelligence Is Key To Investing Successfully” 266. Wealth Wizards: “Wizardry In Wealth Management” 267. Trading Titans: “Titanic Earnings Through Trades” 268. Market Markers:”Mark The Markets And Make Money” 269. Financial Foresight:”Foresight Into Your Finances” 270. Cash Creators: “Creating Cash With Your Trades” 271. Trade Trackers: “Tracking Trades To Profitable Returns” 272. Profit Pioneers: “Pioneering Profits In The Trading Arena” 273. Value Vanguards:”Secure Values With Our Strategies” 274. Investment Insiders:”Insider Knowledge For Investing Success” 275. Exchange Experts:”Experts In Exchanges And Profits” 276. Market Masters: “Master Markets and Maximize Your Profits” 277. Stock Speculators: “Speculation For Maximum Gains” 278. Profit Pros: “Pros In The Profit Game” 279. Chart Checkers:”Check Charts For Increased Returns” 280. Shareholder Solutions:”Solutions To All Your Shareholder Worries” 281. Risk Rangers: “Minimizing Risk, Maximizing Return” 282. Wealth Warriors:”Warriors For Your Financial Futures” 283. Profit Prophets: “Prophecies Of Profits Proven True” 284. Capital Commanders: “Commanding Capital In The Financial Arena” 285. Profitable Partnerships: “Partner With Us For Profit” 286. Stock Savvy: “Savvy Strategies For Stock Success” 287. Market Moguls: “Mogul Minds Making Markets Move” 288. Investment Advisors:”Advisors For All Your Investment Needs” 289. Shares Specialists: “Specialized Strategies For Shareholder Success” 290. Trading Titans: “Titanic Returns On Your Trades” 291. Asset Analysts:”Analyzing Assets For Maximum Profits” 292. Chart Charters: “Charting Paths To Financial Freedom” 293. Exchange Executives: “Executing Exchanges For Maximum Earnings” 294. Profit Pioneers:”Pioneering Profits In The Trading Arena” 295. Value Vanguards:”Secure Values With Our Strategies” 296. Risk Rangers: “Minimizing Risk, Maximizing Return” 297. Financial Forecasters: “Forecasting Your Finances Into The Future” 298. Stock Strategists: “Strategize For Successful Stocks” 299. Portfolio Planners: “Planning Your Portfolio for Maximum Profit” 300. Wealth Wizards:”Wizardry In Wealth Management” 301. Asset Advisors:”Advice On Assets To Maximize Your Returns” 302. Investment Intelligentsia:”Intelligence Is Key To Investing Successfully” 303. Value Visionaries: “Visionary Values in Trading”

Why Should You Pay For CBD Gummies Using Cryptocurrency?

How to run a business.

Trading Plan: 6 Steps to Create One + Examples

Trading Plan: Key Takeaways

• The keys to building a personalized trading plan…
• How to fit your plans to your unique trading style…
• Discover how trading plans help me find the day’s potential movers within 60 seconds of the market open…

See this BEFORE the market opens tomorrow! 

It can be hard to navigate the markets in today’s crazy world. Constructing a bullet-proof trading plan that will carry you through is a must … It can be the difference between surviving and fading out of the market.

How do you do that? Let me show you…

Table of Contents

• 1 What Is a Trading Plan?
• 2 Do You Need a Trading Plan?
• 3 Planning: The Key to Long-Term Trading Success
• 4 Trading Plan Essentials
• 5.1 #1. Set Goals 
• 5.2 #2. Focus on Risk 
• 5.3 #3. Do Your Research 
• 5.4 #4. Plan Your Entry and Exit 
• 5.5 #5. Write It Down 
• 5.6 #6. Review the Trade Afterward
• 6 Trading Plan Examples
• 7 Trading Plan and Trading System: What’s the Difference?
• 8 How to Combine Your Goals With Your Trading Style
• 9 Long-Term Benefits of Trading Plans
• 10 Frequently Asked Questions About Trading Plans
• 11 Who Uses a Trading Plan?
• 12 Can I Alter My Trading Plan Any Time?
• 13 What Key Elements Should Be in a Trading Plan?
• 14 What’s Next?
• 15 Conclusion

What Is a Trading Plan?

It’s your outline of a given trade. It defines why you’re making the trade and how you’ll execute it.

A good plan takes into account your trading style, risk management , and expectations. It lays out your entire approach to trade, from the ticker to your entry, exit, goals, stops, and more.

Traders who build thorough plans and follow them are more likely to keep a level head — and less likely to make big mistakes…

Do You Need a Trading Plan?

Trading plans aren’t sexy. Many traders are quick to dismiss them as unnecessary. They’d rather focus on the more exciting aspects of trading … like hot stocks, chart spikes, or catalysts.

Big mistake! While those things can help you choose stocks to trade, you need to combine them with a plan to get the best results.  

Technically, no, you don’t need a plan to make a trade … But if you want to follow the trajectory of consistent traders before you, you’d be smart to use one.

A good way to build a trading plan to fit your account is to use an all-in-one trading platform like StocksToTrade . It has the essential trading tools and features that can help you formulate a game plan for each day. Try StocksToTrade today — start your 14-day trial now!

Planning: The Key to Long-Term Trading Success

A trading plan gives you a clear-cut plan of attack for entering and exiting a trade.

It’s the difference between a calculated trade and the ‘hold and hope’ mentality that causes so many traders to lose money .

You know how I feel about bag-holding (DON’T DO IT)…

Without a plan, you’re pretty much gambling. You might win here and there, but your progress won’t be as reliable as it would be with a plan in place.

Many traders who don’t use plans begin to see their losses exceed their gains, and they ultimately give up on day trading.

Don’t become a cautionary tale … Make a plan every time!

Trading Plan Essentials

Your plan for a trade should cover essentials such as an entry/exit plan, risk management, and trading goals.

• An entry/exit plan should cover the key points at which you’ll enter a trade (buy) and when you’ll exit a trade (sell)… 
• Risk management is all about limiting your losses . The less money you lose — especially in your early trades — the longer you can stay in the game. This can help you build healthier long-term trading habits. Determine how much you’re willing to lose on every trade. Not every trade will be a winner.
• Stop-loss orders and limit orders are great ways to help minimize risk. Losses are part of the game. Be ready to cope with that.

Each trader’s plan is unique. There’s no one plan to fit all. Build one that best suits your trading needs and goals.

6 Tips for Creating a Useful Trading Plan

Now that you understand the benefits of building plans for your trades, here are some tips on how to do it…

#1. Set Goals 

What do you hope to gain from this trade? Do you want a 10%, 20% gain? Set realistic profit goals. 

And if you’re new, it can help to start small. Then increase your goals as you become consistent. Focus on gaining practice and experience.

Some of the best stock traders recommend starting small . You can size up once you learn and find some consistency.

#2. Focus on Risk 

What’s your risk tolerance? Only YOU can answer that. 

Before you enter a trade, consider how much of your portfolio you’re willing to risk on a given trade. Many traders stick to a rule of risking no more than 1% or 2% of their account. 

If you have a small account, you may decide to risk a little more to gain a bigger position… 

Or you may decide to risk less to try to nail down your process and avoid blowing through your account. Either way, only trade with money you can afford to lose. Trading is risky!

#3. Do Your Research 

Before you enter any trade, do your research. Seek out the big gainers , study the stock charts, and research potential catalysts. 

Be diligent! Research can help you determine how a stock might perform. You can never be 100% sure, but you want to be able to say you did all you could.

I find a lot of the big potential plays within 60 seconds of the market opening … But I wouldn’t know which ones I feel comfortable trading if I didn’t do my due diligence beforehand.

#4. Plan Your Entry and Exit 

Make a specific plan about when you’ll enter and exit a trade. 

Decide which buy signals will be your green light to enter a trade and only enter when you see them. StocksToTrade’s Oracle Scanner does a wonderful job of showing good entry and exit points.

The exit is just as important as the entry, if not more … Consider what you’ll do if a trade starts going south. 

What’s your stop loss? When will you get out if things don’t go your way? Resolve to get out at this point, and don’t take it personally. Never trade on your emotions. 

Using easily identifiable chart markers like the low of the day can be a good point of support to set risk. And certain resistance levels, like the high of day, can act as good points of entry.

Know your profit target, too. Get out once the trade hits your goal. Don’t get greedy.

#5. Write It Down 

Write down your plan. Literally. 

There’s a sense of accountability that comes with physically writing down your plan. And keep it where you’ll see it. 

It’s another way to hold yourself accountable. And you have that information to review for future trading…

Trading is a game of lessons. Knowing what works and what doesn’t helps guide your future trading.

#6. Review the Trade Afterward

After you make a trade, take time to consider how things went. 

Keep your notes from your plans and on how your trades play out in a trading journal or log. That can give you insight into what went right or wrong. And again, you can use that knowledge in future trades. 

You’ll get an idea of where you need to be more diligent.

Trading Plan Examples

Here are a few examples of a potential trading plan with some recent runners…

EZFL 2-day chart (Source: StocksToTrade)

EZFill Holdings, Inc. (NASDAQ: EZFL) was a great example of one of my favorite patterns to trade — the dip and rip . It checked off a lot of boxes:

• Early-morning press release
• Low floater

EZFL dipped before the market open and continued up. Your plan could have been to set your entry at an appealing premarket level and your exit close to that premarket high.

I personally would wait for it to reclaim premarket highs. But my plan doesn’t work for everyone. Some like to buy off the initial bounce.

EZFL tried that level a few times and failed, showing why it’s important to stick to your plan and not get greedy.

Another good example is ChemoCentryx, Inc. (NASDAQ: CCXI).

CCXI 5-day chart (Source: StocksToTrade)

This was a swing trade idea as a weak open red-to-green …

It ran in previous days and was holding up despite a weak open. This showed it had the buyers to support its current level despite the huge gap-up days before.

It ended up running the next morning before finally seeing a sell-off…

You could have used a current day or prior day level of support as your risk and that well-defined top as your exit point.

Remember, write down all of these decisions as well as WHY you make them.

Trading Plan and Trading System: What’s the Difference?

Trading systems don’t rely on individual decision-making whatsoever … It relies on algorithms to determine everything.

This isn’t necessarily a bad thing. A lot of traders use this style. 

A trading plan is more personalized. Also, algorithms can’t account for traders’ emotions.

Doing research and understanding how the market might react to a stock can give you a huge edge. It’s not just indicators and trading signals like a trading system.

How to Combine Your Goals With Your Trading Style

Every trader has different goals. Some want to day trade. Others want to hold long term. You may have to tinker around to find what suits you.

Do you know what kind of trader you are and what your goals are?

How often do you want to trade? What kinds of stocks do you want to trade? What’s your risk tolerance? 

These are all important questions to ask yourself before you begin trading.

If you hold a 9-to-5 job, day trading may not work for you. You may want to swing trade or even hold stocks longer term. 

The type of trading you choose should play a big role in your plans.

Long-Term Benefits of Trading Plans

Trading plans can change your relationship with trading. They can help you stop chasing ‘bright and shiny’ stocks and start making calculated trades.

So much in trading is beyond your control. But you can control when you exit and enter of trades. 

Learning how to create a plan is essential to your trading education.

Frequently Asked Questions About Trading Plans

Here are some common questions about trading plans…

Who Uses a Trading Plan?

Any trader can and should make plans — new traders, long-time traders, day traders, swing traders. It’s a key step. If you want to be a smarter trader, consider using one.

Can I Alter My Trading Plan Any Time?

Of course! Don’t set your plans in stone. They’re something you’ll work on and improve throughout your trading career. That said, stick to your plan once you’re in a trade. Remember your entry/exit and risk management.

What Key Elements Should Be in a Trading Plan?

At a minimum, set your entry and exit, risk management, and trading goals. Those are the key elements of any plan. You can include as much detail as needed for your research. Remember, the details you track for every trade can help your analysis down the road.

What’s Next?

Using the tips I just gave you, take the time to learn how to craft your trading plan. Test strategies to find what works best for your trading goals. 

And if you’re looking to take your trading to the next level, consider joining the SteadyTrade Team. It’s a community of dedicated traders from around the world, run by seasoned pros. 

Our SteadyTrade Team mentorship program is all about helping traders learn to navigate today’s volatile markets. Sign up for the SteadyTrade Team today!

Adaptation is a key to surviving the markets. Building a trading plan around the ever-changing market can help you find your edge.

That’s why it’s important to study up and continue to learn. 

Adapting doesn’t have to mean changing your risk levels or goals. Keeping those in mind will help you stay true to yourself while finding your way forward.

Now, time to get your trading plans in order!

How do you plan your trades? What’s essential for your plans? Let me know with a comment below!

Home > Finance > Investing

How to Invest in Stocks as a Small-Business Owner

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Want to start investing in stocks (or options, futures, or other related products)? Well, the good news is that you can do so with just a few clicks. Thanks to online brokers , you can start trading within minutes.

Of course, if you want to do things right, there are a few things you should do first (and after). After all, you want to maximize your chances of making a profit on the stock market.

So let’s talk through each step of the investment process and get you started on the right foot.

How to invest in stocks as a small business

• Make sure investing is right for you
• Decide on an investment strategy
• Find the right brokerage for you
• Open and fund your brokerage account
• Make your initial investment
• Adjust your strategy as needed

1. Make sure investing is right for you

We know you’re eager to start buying stock, but we urge you not to skip this step. Before you get started trading on the stock exchange , you need to make sure that investing is the best choice for you and your business.

For individuals, investing is often a no-brainer. The stock market often gives better returns than simply sticking your money in a savings account, at least in the long term. And even if you’re not interested in actively managing your portfolio, retirement accounts like your 401(k) and Roth IRA mean you likely have some kind of money on the stock market.

But for businesses, the math isn’t so simple. For one, businesses usually have plenty of other ways they can effectively spend money. Instead of becoming an investor with business funds, you could use that money to buy more inventory, to upgrade your equipment, to hire more employees―you get the idea. The point is, you can spend your money in a way that affects your bottom line and the likelihood that your business will still be around in a few years.

Which brings us to the next point: the stock market usually works better as a long-term investment strategy. As you’ve probably noticed, the stock market has its ups and downs. Some years, you’ll probably lose money. But over time, those ups and down balance out to give an average return between 4% and 10%, depending on who you ask. The “over time” bit is key, though.

For individuals, that’s no problem. Most of us plan on being around for many years to come, so we can reap the sweet benefits of long-term returns. Businesses, though, tend to have shorter lifespans than people. In 10 years, you could have retired or sold your business, meaning your business never gets the long-term benefits of investment.

And we probably don’t need to remind you of how many small-businesses fail in a 10-year period ( too many ). So you need to decide what will give your business a leg up during those 10 years: squirreling away money in the stock market or making regular investments in the business's strategy and operations.

In the end, only you have the answer. You know your business and its needs far better than we ever could. So if you really think you want to become a business investor, we’re here to help. The remaining steps below will help guide you on that journey.

But if you’re having second thoughts, then you might want to consider doing something else with your business’s money. For example, high-yield savings accounts for businesses offer some returns on your cash, but they’re less risky and more liquid than the stock market.

With that word of caution out of the way, let’s talk about what happens next in the investing process.

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2. Decide on an investment strategy

Once you’re sure you want to invest, you need to decide what that looks like for you and your business, because, as it turns out, investing covers a lot of territory.

For example, is there an individual stock (or several) you want to invest in? Or would you rather have a more diversified portfolio with an ETF (exchange-traded fund) or mutual fund? Do you think Bitcoin is the future and want to invest in cryptocurrency?

Even if you want to stick with stocks, you’ll need to decide on a specific investment strategy . Obviously, you’ll have to decide what companies you want shares in, but you’ll also have to decide what type of stock you want:

• Preferred stock lets you get a dividend from the company (a share of the profits), but you don’t get any voting rights.
• Common stock gives you voting rights in the company, but you’re less likely to receive any dividends.

In other words, you’ve got a lot to figure out if you want to be an investor.

The answers to all these questions will depend on things like your risk tolerance, how much money you want to invest, and whether you’re trying to get short-term returns (riskier) or long-term returns (safer).

For example, if you’re trying for short-term returns, you might want to stick to preferred stocks in the hopes that your company of choice does well.

In that case, you can end up with a nice dividend and the ability to sell the stock for more than you paid for it.

But if you’re more interested in long-term returns, you’ll probably want to get an ETF or mutual fund and hold onto it.

3. Find the right brokerage for you

After you’ve figured out a rough investment plan, it’s time to start looking for a broker. A broker lets you conduct your trading, analyze your performance, and much more, all through their own platforms.

Because this is the year 2023, we recommend using an online stock broker for your trading needs. (We’ve ranked our favorites in our guide to the best online stock brokers for businesses.)

As you’re comparing brokers, think back to the investing strategy you created in step two. Different brokers excel at different things. If you simply want to buy and sell stocks, many brokers can work. But if you want to trade cryptocurrency, you’ll only have a few brokers to choose from. So look for a broker that can complement your investment strategy .

You’ll also want to look at other key aspects of any stock broker:

• Trading fees and commission fees
• Brokerage account fees
• Minimum account deposits
• Analysis tools
• Platform features

Basically, you’re looking for a broker that will help you invest without taking too much money themselves. And if they have tools to help guide your investment decisions, that’s even better.

4. Open and fund your brokerage account

When you’ve figured out which broker you want to go with, you’ll need to open a new account and add money to it.

In many cases, you can do this all online. Just go to the broker’s website and go through its signup process. (Make sure you have details for your business bank account handy so you can fund your brokerage account.)

In a few (frustrating) cases, you may need to open an account by printing off a physical form and mailing it in.

Note that some brokerages require you to make a minimum initial deposit when you open the account―sometimes requiring a few thousand dollars. Others don’t require you to put any money in until you want to start trading. (And some limit your ability to use advanced features until you’ve made a large enough deposit.) Make sure you’ve done your homework so you can be ready to fund your account appropriately.

With an active brokerage account, you’re ready to start putting your money to work on the stock market.

5. Make your initial investment

The process of actually buying stock (or an ETF or a mutual fund or anything else) will depend on who your brokerage account is with. But as a general rule, they make it as easy as possible.

You’ll have to log on to your account, choose the product you want to buy, and then confirm the transaction.

And voila! You’ve started your new life as an investor. With any luck, you’re on your way to making money on the market.

Of course, you’ll probably end up doing much more than buying one stock. Your work isn’t over just yet.

6. Adjust your strategy as needed

At this point, you can buy more stock, sell the stock you have, or simply hold onto what you have. The world is your (trading) oyster.

Again, you’ll want to think back to the investment strategy you created. If you’re aiming for long-term returns, you’ll probably want to settle back and let your fund make you some money. But if you’re trying to get short-term returns, you’ll likely want to take a more active trading approach.

Any broker worth its salt should give you plenty of tools to analyze how your individual brokerage account is performing. So if you are planning adjustments to your investment portfolio, you should refer to those tools to inform your decision-making.

And that’s how to invest in stocks as a business investor.

The takeaway

You can get started in stock investing with just a few simple steps. An investment plan, a brokerage account, and some money are all it takes to begin stock trading. Honestly, it's pretty simple. The harder part, of course, is actually making money on your investment.

Sadly, we can't help you with that part, but we hope we've demystified the stock investing process for you.

Good luck on the market!

If you want to do your trading on the go, check out our rankings of the best investment apps for business .

FAQs about investing in stocks

When you’re starting to invest in stocks, you can invest as much or as little as you want. It all depends on your investment strategy, your goals, and your specific situation. For a more specific number, you should probably talk to a financial advisor about all of those things.

The amount of money you need to invest depends on both the stock price of the shares you plan to buy and the broker you go with. If you choose a broker with no minimum requirements and no trading fees, you can get started for just the stock price of a share―less than $5, in some cases.

The best investment strategy is a hotly debated topic. Many, many books and articles have been written, all with their own takes on the matter. In other words, there’s no clear answer.

So you’ll have to figure out what you think makes a good investment decision for yourself. Sorry. (For the record, Warren Buffet thinks index funds are the best bet.)

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Trading Plan Template for 2024 [Free PDF | Sheets Download]

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• Published: 11 May 2022
• Last Updated: 1 April 2024

Needless to say, having a plan before you start trading is essential to your success as a trader. Every experienced trader will tell you that when you enter the markets, you risk your money and, more importantly, your ego and confidence in yourself.

• A well-thought-out trading plan is crucial for forex trading success, safeguarding both finances and self-confidence.
• While many traders are naturally skilled, creating a clear trading plan can still be challenging.
• Using a trading plan template can streamline your strategy and increase chances of consistent profits.

This article will help you with everything you need to know about developing a trading plan . We’ll also include a trading plan PDF, a trading plan Excel template , and a Word document that you can download and use in your trading journey.

• What is a Trading Plan Template

Trading Plan Template FREE Downloads

• How to Build Your Own Trading Plan Template?

1. Set Your Goals – Financially and Emotionally

2. get familiar with trading jargon and analysis methods, 3. develop a trading strategy, 4. set a risk reward ratio, 5. always learn and grow, 6. make an organized trading track record.

• BOONUS: Trading Plan Infographic

What is a Trading Plan Template?

As the name implies, a trading plan is a set of rules and guidelines that a trader follows to execute a trade. Besides that, a trading plan might include suggestions for a healthy trading daily routine and tasks, hence a trading checklist , that will help you manage your account and control your emotions.

For example, with a trading plan, you can define your:

• trading goals
• strengths and weaknesses
• risk management strategy
• trading strategy
• entry rules
• daily routine
• and much more

“Plan your trade and then trade your plan.”

In this section, we have created trading plan templates that you can use for free in the format of your preference. 

• Trading Plan Template PDF
• Trading Plan Template Google Sheets
• Trading Plan Template Word

How to Build Your Trading Plan Template in 6 Easy Steps

So, now that you understand what a forex trading plan is, you need to create a specific plan that matches your style and personality. Personally, while working as a trader in a proprietary trading firm , I remember every trader had a different method, routine, tasks, and rules.

For example, some traders like adding sticky notes on their desktops while others prefer a clean table. Some traders enter hundreds of trades in one trading day while others enter one or two trades in a day. So, it’s up to you to define your own plan and trading strategies .

Nonetheless, based on my knowledge and experience, there are some must-have steps you need to consider to develop a successful trading plan .

You can download our trading plan template below and check the steps on how to develop your trading plan later in this article.

Get your free trading plan now

Discipline is key to your trading success

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First and foremost, you must define your goals. In other words, you will need to know what you plan to achieve from your trading experience.

To help yourself, ask these questions :

• Is it an additional income only? Your main income?
• Do you plan to get rich from trading?
• What is the trading capital you are willing to risk and what is your profit target?
• How many hours a day do you plan to spend on trading?

In that aspect, you’d be surprised to know that many people who become professional successful traders do not necessarily do it to make money.

Instead, some traders do it for fun, a hobby, or a competitive game. So consider these factors as well. If this is the case for you, then you need to know it before you start trading. Maybe it can give you an advantage over other participants in the forex market .

Before you make your first trade in the forex market, you first must understand the trading jargon and the different analysis methods.

If needed, take a quick trading course to learn how the forex or the stock market works, read articles, books, financial sites, etc. Additionally, you better explore the two methods to analyze financial assets – technical analysis and fundamental analysis . 

Then, find the best way for you to analyze the markets and read Forex charts. It’s up to you to decide whether you want to use line, bar, or candlestick charts and, more importantly, what technical indicators you want to use.

Additionally, you can learn how to read popular chart patterns and use them to find trading opportunities. Once again, you have to try before you know it.

No one is born a great Trader, one gets great by learning

There are no two traders that are precisely the same. Therefore, you must find your trading strategy and trading style. This is a result of trial and error. It might take weeks or months until you get to the point where you have established a successful trading strategy, and there’s no way to escape this step.

When you make your first step in the trading world, you’ll get familiar with the different trading strategies – position trading, swing trading, day trading, and scalping trading. Moreover, you can try different strategies such as the naked trading strategy or the 5-3-1 forex trading strategy .

Keep in mind that there are many trading strategies to choose from, but you’ll have to find your unique trading style and strategy within time. For that matter, you need to use a trading plan at the beginning of your journey to find the right strategy that matches your personality.

Trading risk management is a predefined strategy to minimize losses and maximize profits. There are lots of tools and risk management rules a trader can use to protect themselves from losses and effectively manage their trading account.

Having said that, there’s one tool used by many traders, which is the most basic and the most effective of all – That is the risk-reward ratio .

In simple terms, a risk-reward ratio is a method to calculate the potential profit of a trade/day/week/month to a potential loss. In other words, it is a method to define your trade risk, that is how much risk you are willing in a trader, or in a day (the method is particularly for day trading).

For example, if you decide to use a risk-reward of 2:1, you are essentially willing to risk $1 for each trade to earn $2.

Trading is not like most professions. The markets always change, the technology evolves, and even the dynamic of the markets is constantly changing. Trust me, financial markets are not the same as they used to be fifteen years ago, and most likely, they will change again in the future.

I mean, the cryptocurrency market is one good example of the unpredictable nature of the trading world and financial markets.

This way or the other, you must read trading books and articles, watch trading movies , and listen to trading podcasts – everything you can do to increase your knowledge. Yes, knowledge is power, but in trading, knowledge is essential.

“An investment in knowledge always pays the best interest.” Ben Franklin

In the final step, make sure you analyze your trading past performance and keep track of your winning and losing trades. Yes, it’s an annoying task, especially when you have a losing day.

Writing down your losing trades is a punch to your ego, but it will help you improve your performance and trading decisions in the future. By doing so, you can learn your worst-performing days of the week, hours, financial instruments, etc. 

Luckily, in most retail investor accounts, you can enter your trading platform and extract your daily/weekly/monthly performance. So, in the words of Forrest Gump: “One less thing to worry about”.

BONUS: Trading Plan Action Plan Infographic

Here is an infographic with 6 action steps for your trading plan.

You can also check our blog post about using a trading journal template [free Google Sheets and Excel spreadsheets included]

Over to You

In a nutshell, every trader must have a well-defined solid trading plan . Developing an organized trading system is the first step in becoming a professional and successful forex trader and will increase your chances of success over the short and long term.

For now, you can use our free Forex trading plan template to start with. Then, add notes, tasks, or any other inspirational quotes you think will help you to trade better.

Risk Disclosure: The information provided in this article is not intended to give financial advice, recommend investments, guarantee profits, or shield you from losses. Our content is only for informational purposes and to help you understand the risks and complexity of these markets by providing objective analysis. Before trading, carefully consider your experience, financial goals, and risk tolerance. Trading involves significant potential for financial loss and isn't suitable for everyone.

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Disclaimer: The information on the HowToTrade.com website and inside our Trading Academy platform is intended for educational purposes and is not to be construed as investment advice. Trading the financial markets carries a high level of risk and may not be suitable for all investors. Before trading, you should carefully consider your investment objectives, experience, and risk appetite. Only trade with money you are prepared to lose. Like any investment, there is a possibility that you could sustain losses of some or all of your investment whilst trading. You should seek independent advice before trading if you have any doubts. Past performance in the markets is not a reliable indicator of future performance.

HowToTrade.com takes no responsibility for loss incurred as a result of the content provided inside our Trading Academy. By signing up as a member you acknowledge that we are not providing financial advice and that you are making the decision on the trades you place in the markets. We have no knowledge of the level of money you are trading with or the level of risk you are taking with each trade.

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How to Write a Business Plan: Step-by-Step Guide + Examples

Noah Parsons

24 min. read

Updated May 7, 2024

Writing a business plan doesn’t have to be complicated. 

In this step-by-step guide, you’ll learn how to write a business plan that’s detailed enough to impress bankers and potential investors, while giving you the tools to start, run, and grow a successful business.

• The basics of business planning

If you’re reading this guide, then you already know why you need a business plan . 

You understand that planning helps you: 

• Raise money
• Grow strategically
• Keep your business on the right track 

As you start to write your plan, it’s useful to zoom out and remember what a business plan is .

At its core, a business plan is an overview of the products and services you sell, and the customers that you sell to. It explains your business strategy: how you’re going to build and grow your business, what your marketing strategy is, and who your competitors are.

Most business plans also include financial forecasts for the future. These set sales goals, budget for expenses, and predict profits and cash flow. 

A good business plan is much more than just a document that you write once and forget about. It’s also a guide that helps you outline and achieve your goals. 

After completing your plan, you can use it as a management tool to track your progress toward your goals. Updating and adjusting your forecasts and budgets as you go is one of the most important steps you can take to run a healthier, smarter business. 

We’ll dive into how to use your plan later in this article.

There are many different types of plans , but we’ll go over the most common type here, which includes everything you need for an investor-ready plan. However, if you’re just starting out and are looking for something simpler—I recommend starting with a one-page business plan . It’s faster and easier to create. 

It’s also the perfect place to start if you’re just figuring out your idea, or need a simple strategic plan to use inside your business.

Dig deeper : How to write a one-page business plan

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• What to include in your business plan

Executive summary

The executive summary is an overview of your business and your plans. It comes first in your plan and is ideally just one to two pages. Most people write it last because it’s a summary of the complete business plan.

Ideally, the executive summary can act as a stand-alone document that covers the highlights of your detailed plan. 

In fact, it’s common for investors to ask only for the executive summary when evaluating your business. If they like what they see in the executive summary, they’ll often follow up with a request for a complete plan, a pitch presentation , or more in-depth financial forecasts .

Your executive summary should include:

• A summary of the problem you are solving
• A description of your product or service
• An overview of your target market
• A brief description of your team
• A summary of your financials
• Your funding requirements (if you are raising money)

Dig Deeper: How to write an effective executive summary

Products and services description

This is where you describe exactly what you’re selling, and how it solves a problem for your target market. The best way to organize this part of your plan is to start by describing the problem that exists for your customers. After that, you can describe how you plan to solve that problem with your product or service. 

This is usually called a problem and solution statement .

To truly showcase the value of your products and services, you need to craft a compelling narrative around your offerings. How will your product or service transform your customers’ lives or jobs? A strong narrative will draw in your readers.

This is also the part of the business plan to discuss any competitive advantages you may have, like specific intellectual property or patents that protect your product. If you have any initial sales, contracts, or other evidence that your product or service is likely to sell, include that information as well. It will show that your idea has traction , which can help convince readers that your plan has a high chance of success.

Market analysis

Your target market is a description of the type of people that you plan to sell to. You might even have multiple target markets, depending on your business. 

A market analysis is the part of your plan where you bring together all of the information you know about your target market. Basically, it’s a thorough description of who your customers are and why they need what you’re selling. You’ll also include information about the growth of your market and your industry .

Try to be as specific as possible when you describe your market. 

Include information such as age, income level, and location—these are what’s called “demographics.” If you can, also describe your market’s interests and habits as they relate to your business—these are “psychographics.” 

Related: Target market examples

Essentially, you want to include any knowledge you have about your customers that is relevant to how your product or service is right for them. With a solid target market, it will be easier to create a sales and marketing plan that will reach your customers. That’s because you know who they are, what they like to do, and the best ways to reach them.

Next, provide any additional information you have about your market. 

What is the size of your market ? Is the market growing or shrinking? Ideally, you’ll want to demonstrate that your market is growing over time, and also explain how your business is positioned to take advantage of any expected changes in your industry.

Dig Deeper: Learn how to write a market analysis

Competitive analysis

Part of defining your business opportunity is determining what your competitive advantage is. To do this effectively, you need to know as much about your competitors as your target customers. 

Every business has some form of competition. If you don’t think you have competitors, then explore what alternatives there are in the market for your product or service. 

For example: In the early years of cars, their main competition was horses. For social media, the early competition was reading books, watching TV, and talking on the phone.

A good competitive analysis fully lays out the competitive landscape and then explains how your business is different. Maybe your products are better made, or cheaper, or your customer service is superior. Maybe your competitive advantage is your location – a wide variety of factors can ultimately give you an advantage.

Dig Deeper: How to write a competitive analysis for your business plan

Marketing and sales plan

The marketing and sales plan covers how you will position your product or service in the market, the marketing channels and messaging you will use, and your sales tactics. 

The best place to start with a marketing plan is with a positioning statement . 

This explains how your business fits into the overall market, and how you will explain the advantages of your product or service to customers. You’ll use the information from your competitive analysis to help you with your positioning. 

For example: You might position your company as the premium, most expensive but the highest quality option in the market. Or your positioning might focus on being locally owned and that shoppers support the local economy by buying your products.

Once you understand your positioning, you’ll bring this together with the information about your target market to create your marketing strategy . 

This is how you plan to communicate your message to potential customers. Depending on who your customers are and how they purchase products like yours, you might use many different strategies, from social media advertising to creating a podcast. Your marketing plan is all about how your customers discover who you are and why they should consider your products and services. 

While your marketing plan is about reaching your customers—your sales plan will describe the actual sales process once a customer has decided that they’re interested in what you have to offer. 

If your business requires salespeople and a long sales process, describe that in this section. If your customers can “self-serve” and just make purchases quickly on your website, describe that process. 

A good sales plan picks up where your marketing plan leaves off. The marketing plan brings customers in the door and the sales plan is how you close the deal.

Together, these specific plans paint a picture of how you will connect with your target audience, and how you will turn them into paying customers.

Dig deeper: What to include in your sales and marketing plan

Business operations

The operations section describes the necessary requirements for your business to run smoothly. It’s where you talk about how your business works and what day-to-day operations look like. 

Depending on how your business is structured, your operations plan may include elements of the business like:

• Supply chain management
• Manufacturing processes
• Equipment and technology
• Distribution

Some businesses distribute their products and reach their customers through large retailers like Amazon.com, Walmart, Target, and grocery store chains. 

These businesses should review how this part of their business works. The plan should discuss the logistics and costs of getting products onto store shelves and any potential hurdles the business may have to overcome.

If your business is much simpler than this, that’s OK. This section of your business plan can be either extremely short or more detailed, depending on the type of business you are building.

For businesses selling services, such as physical therapy or online software, you can use this section to describe the technology you’ll leverage, what goes into your service, and who you will partner with to deliver your services.

Dig Deeper: Learn how to write the operations chapter of your plan

Key milestones and metrics

Although it’s not required to complete your business plan, mapping out key business milestones and the metrics can be incredibly useful for measuring your success.

Good milestones clearly lay out the parameters of the task and set expectations for their execution. You’ll want to include:

• A description of each task
• The proposed due date
• Who is responsible for each task

If you have a budget, you can include projected costs to hit each milestone. You don’t need extensive project planning in this section—just list key milestones you want to hit and when you plan to hit them. This is your overall business roadmap. 

Possible milestones might be:

• Website launch date
• Store or office opening date
• First significant sales
• Break even date
• Business licenses and approvals

You should also discuss the key numbers you will track to determine your success. Some common metrics worth tracking include:

• Conversion rates
• Customer acquisition costs
• Profit per customer
• Repeat purchases

It’s perfectly fine to start with just a few metrics and grow the number you are tracking over time. You also may find that some metrics simply aren’t relevant to your business and can narrow down what you’re tracking.

Dig Deeper: How to use milestones in your business plan

Organization and management team

Investors don’t just look for great ideas—they want to find great teams. Use this chapter to describe your current team and who you need to hire . You should also provide a quick overview of your location and history if you’re already up and running.

Briefly highlight the relevant experiences of each key team member in the company. It’s important to make the case for why yours is the right team to turn an idea into a reality. 

Do they have the right industry experience and background? Have members of the team had entrepreneurial successes before? 

If you still need to hire key team members, that’s OK. Just note those gaps in this section.

Your company overview should also include a summary of your company’s current business structure . The most common business structures include:

• Sole proprietor
• Partnership

Be sure to provide an overview of how the business is owned as well. Does each business partner own an equal portion of the business? How is ownership divided? 

Potential lenders and investors will want to know the structure of the business before they will consider a loan or investment.

Dig Deeper: How to write about your company structure and team

Financial plan

Last, but certainly not least, is your financial plan chapter. 

Entrepreneurs often find this section the most daunting. But, business financials for most startups are less complicated than you think, and a business degree is certainly not required to build a solid financial forecast. 

A typical financial forecast in a business plan includes the following:

• Sales forecast : An estimate of the sales expected over a given period. You’ll break down your forecast into the key revenue streams that you expect to have.
• Expense budget : Your planned spending such as personnel costs , marketing expenses, and taxes.
• Profit & Loss : Brings together your sales and expenses and helps you calculate planned profits.
• Cash Flow : Shows how cash moves into and out of your business. It can predict how much cash you’ll have on hand at any given point in the future.
• Balance Sheet : A list of the assets, liabilities, and equity in your company. In short, it provides an overview of the financial health of your business. 

A strong business plan will include a description of assumptions about the future, and potential risks that could impact the financial plan. Including those will be especially important if you’re writing a business plan to pursue a loan or other investment.

Dig Deeper: How to create financial forecasts and budgets

This is the place for additional data, charts, or other information that supports your plan.

Including an appendix can significantly enhance the credibility of your plan by showing readers that you’ve thoroughly considered the details of your business idea, and are backing your ideas up with solid data.

Just remember that the information in the appendix is meant to be supplementary. Your business plan should stand on its own, even if the reader skips this section.

Dig Deeper : What to include in your business plan appendix

Optional: Business plan cover page

Adding a business plan cover page can make your plan, and by extension your business, seem more professional in the eyes of potential investors, lenders, and partners. It serves as the introduction to your document and provides necessary contact information for stakeholders to reference.

Your cover page should be simple and include:

• Company logo
• Business name
• Value proposition (optional)
• Business plan title
• Completion and/or update date
• Address and contact information
• Confidentiality statement

Just remember, the cover page is optional. If you decide to include it, keep it very simple and only spend a short amount of time putting it together.

Dig Deeper: How to create a business plan cover page

How to use AI to help write your business plan

Generative AI tools such as ChatGPT can speed up the business plan writing process and help you think through concepts like market segmentation and competition. These tools are especially useful for taking ideas that you provide and converting them into polished text for your business plan.

The best way to use AI for your business plan is to leverage it as a collaborator , not a replacement for human creative thinking and ingenuity. 

AI can come up with lots of ideas and act as a brainstorming partner. It’s up to you to filter through those ideas and figure out which ones are realistic enough to resonate with your customers. 

There are pros and cons of using AI to help with your business plan . So, spend some time understanding how it can be most helpful before just outsourcing the job to AI.

Learn more: 10 AI prompts you need to write a business plan

• Writing tips and strategies

To help streamline the business plan writing process, here are a few tips and key questions to answer to make sure you get the most out of your plan and avoid common mistakes .  

Determine why you are writing a business plan

Knowing why you are writing a business plan will determine your approach to your planning project. 

For example: If you are writing a business plan for yourself, or just to use inside your own business , you can probably skip the section about your team and organizational structure. 

If you’re raising money, you’ll want to spend more time explaining why you’re looking to raise the funds and exactly how you will use them.

Regardless of how you intend to use your business plan , think about why you are writing and what you’re trying to get out of the process before you begin.

Keep things concise

Probably the most important tip is to keep your business plan short and simple. There are no prizes for long business plans . The longer your plan is, the less likely people are to read it. 

So focus on trimming things down to the essentials your readers need to know. Skip the extended, wordy descriptions and instead focus on creating a plan that is easy to read —using bullets and short sentences whenever possible.

Have someone review your business plan

Writing a business plan in a vacuum is never a good idea. Sometimes it’s helpful to zoom out and check if your plan makes sense to someone else. You also want to make sure that it’s easy to read and understand.

Don’t wait until your plan is “done” to get a second look. Start sharing your plan early, and find out from readers what questions your plan leaves unanswered. This early review cycle will help you spot shortcomings in your plan and address them quickly, rather than finding out about them right before you present your plan to a lender or investor.

If you need a more detailed review, you may want to explore hiring a professional plan writer to thoroughly examine it.

Use a free business plan template and business plan examples to get started

Knowing what information to include in a business plan is sometimes not quite enough. If you’re struggling to get started or need additional guidance, it may be worth using a business plan template. 

There are plenty of great options available (we’ve rounded up our 8 favorites to streamline your search).

But, if you’re looking for a free downloadable business plan template , you can get one right now; download the template used by more than 1 million businesses. 

Or, if you just want to see what a completed business plan looks like, check out our library of over 550 free business plan examples . 

We even have a growing list of industry business planning guides with tips for what to focus on depending on your business type.

Common pitfalls and how to avoid them

It’s easy to make mistakes when you’re writing your business plan. Some entrepreneurs get sucked into the writing and research process, and don’t focus enough on actually getting their business started. 

Here are a few common mistakes and how to avoid them:

Not talking to your customers : This is one of the most common mistakes. It’s easy to assume that your product or service is something that people want. Before you invest too much in your business and too much in the planning process, make sure you talk to your prospective customers and have a good understanding of their needs.

• Overly optimistic sales and profit forecasts: By nature, entrepreneurs are optimistic about the future. But it’s good to temper that optimism a little when you’re planning, and make sure your forecasts are grounded in reality. 
• Spending too much time planning: Yes, planning is crucial. But you also need to get out and talk to customers, build prototypes of your product and figure out if there’s a market for your idea. Make sure to balance planning with building.
• Not revising the plan: Planning is useful, but nothing ever goes exactly as planned. As you learn more about what’s working and what’s not—revise your plan, your budgets, and your revenue forecast. Doing so will provide a more realistic picture of where your business is going, and what your financial needs will be moving forward.
• Not using the plan to manage your business: A good business plan is a management tool. Don’t just write it and put it on the shelf to collect dust – use it to track your progress and help you reach your goals.
• Presenting your business plan

The planning process forces you to think through every aspect of your business and answer questions that you may not have thought of. That’s the real benefit of writing a business plan – the knowledge you gain about your business that you may not have been able to discover otherwise.

With all of this knowledge, you’re well prepared to convert your business plan into a pitch presentation to present your ideas. 

A pitch presentation is a summary of your plan, just hitting the highlights and key points. It’s the best way to present your business plan to investors and team members.

Dig Deeper: Learn what key slides should be included in your pitch deck

Use your business plan to manage your business

One of the biggest benefits of planning is that it gives you a tool to manage your business better. With a revenue forecast, expense budget, and projected cash flow, you know your targets and where you are headed.

And yet, nothing ever goes exactly as planned – it’s the nature of business.

That’s where using your plan as a management tool comes in. The key to leveraging it for your business is to review it periodically and compare your forecasts and projections to your actual results.

Start by setting up a regular time to review the plan – a monthly review is a good starting point. During this review, answer questions like:

• Did you meet your sales goals?
• Is spending following your budget?
• Has anything gone differently than what you expected?

Now that you see whether you’re meeting your goals or are off track, you can make adjustments and set new targets. 

Maybe you’re exceeding your sales goals and should set new, more aggressive goals. In that case, maybe you should also explore more spending or hiring more employees. 

Or maybe expenses are rising faster than you projected. If that’s the case, you would need to look at where you can cut costs.

A plan, and a method for comparing your plan to your actual results , is the tool you need to steer your business toward success.

Learn More: How to run a regular plan review

Free business plan templates and examples

Kickstart your business plan writing with one of our free business plan templates or recommended tools.

Free business plan template

Download a free SBA-approved business plan template built for small businesses and startups.

Download Template

One-page plan template

Download a free one-page plan template to write a useful business plan in as little as 30-minutes.

Sample business plan library

Explore over 500 real-world business plan examples from a wide variety of industries.

View Sample Plans

How to write a business plan FAQ

What is a business plan?

A document that describes your business , the products and services you sell, and the customers that you sell to. It explains your business strategy, how you’re going to build and grow your business, what your marketing strategy is, and who your competitors are.

What are the benefits of a business plan?

A business plan helps you understand where you want to go with your business and what it will take to get there. It reduces your overall risk, helps you uncover your business’s potential, attracts investors, and identifies areas for growth.

Having a business plan ultimately makes you more confident as a business owner and more likely to succeed for a longer period of time.

What are the 7 steps of a business plan?

The seven steps to writing a business plan include:

• Write a brief executive summary
• Describe your products and services.
• Conduct market research and compile data into a cohesive market analysis.
• Describe your marketing and sales strategy.
• Outline your organizational structure and management team.
• Develop financial projections for sales, revenue, and cash flow.
• Add any additional documents to your appendix.

What are the 5 most common business plan mistakes?

There are plenty of mistakes that can be made when writing a business plan. However, these are the 5 most common that you should do your best to avoid:

• 1. Not taking the planning process seriously.
• Having unrealistic financial projections or incomplete financial information.
• Inconsistent information or simple mistakes.
• Failing to establish a sound business model.
• Not having a defined purpose for your business plan.

What questions should be answered in a business plan?

Writing a business plan is all about asking yourself questions about your business and being able to answer them through the planning process. You’ll likely be asking dozens and dozens of questions for each section of your plan.

However, these are the key questions you should ask and answer with your business plan:

• How will your business make money?
• Is there a need for your product or service?
• Who are your customers?
• How are you different from the competition?
• How will you reach your customers?
• How will you measure success?

How long should a business plan be?

The length of your business plan fully depends on what you intend to do with it. From the SBA and traditional lender point of view, a business plan needs to be whatever length necessary to fully explain your business. This means that you prove the viability of your business, show that you understand the market, and have a detailed strategy in place.

If you intend to use your business plan for internal management purposes, you don’t necessarily need a full 25-50 page business plan. Instead, you can start with a one-page plan to get all of the necessary information in place.

What are the different types of business plans?

While all business plans cover similar categories, the style and function fully depend on how you intend to use your plan. Here are a few common business plan types worth considering.

Traditional business plan: The tried-and-true traditional business plan is a formal document meant to be used when applying for funding or pitching to investors. This type of business plan follows the outline above and can be anywhere from 10-50 pages depending on the amount of detail included, the complexity of your business, and what you include in your appendix.

Business model canvas: The business model canvas is a one-page template designed to demystify the business planning process. It removes the need for a traditional, copy-heavy business plan, in favor of a single-page outline that can help you and outside parties better explore your business idea.

One-page business plan: This format is a simplified version of the traditional plan that focuses on the core aspects of your business. You’ll typically stick with bullet points and single sentences. It’s most useful for those exploring ideas, needing to validate their business model, or who need an internal plan to help them run and manage their business.

Lean Plan: The Lean Plan is less of a specific document type and more of a methodology. It takes the simplicity and styling of the one-page business plan and turns it into a process for you to continuously plan, test, review, refine, and take action based on performance. It’s faster, keeps your plan concise, and ensures that your plan is always up-to-date.

What’s the difference between a business plan and a strategic plan?

A business plan covers the “who” and “what” of your business. It explains what your business is doing right now and how it functions. The strategic plan explores long-term goals and explains “how” the business will get there. It encourages you to look more intently toward the future and how you will achieve your vision.

However, when approached correctly, your business plan can actually function as a strategic plan as well. If kept lean, you can define your business, outline strategic steps, and track ongoing operations all with a single plan.

Noah is the COO at Palo Alto Software, makers of the online business plan app LivePlan. He started his career at Yahoo! and then helped start the user review site Epinions.com. From there he started a software distribution business in the UK before coming to Palo Alto Software to run the marketing and product teams.

Table of Contents

• Use AI to help write your plan
• Common planning mistakes
• Manage with your business plan
• Templates and examples

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10 Step Guide to Investing in Stocks

Step 1: set clear investment goals, step 2: determine how much you can afford to invest, step 3: determine your tolerance for risk, step 4: determine your investing style, step 5. choose an investment account, step 6: learn the costs of investing, step 7: pick your broker, step 8: how to fund your stock account, step 9: pick your stocks, step 10. keep learning about investing in stocks, best stocks for beginning investors, are stock funds good for beginner investors, do i have to live in the u.s. to open a brokerage account, the bottom line, how to invest in stocks: a beginner’s guide.

Yarilet Perez is an experienced multimedia journalist and fact-checker with a Master of Science in Journalism. She has worked in multiple cities covering breaking news, politics, education, and more. Her expertise is in personal finance and investing, and real estate.

Investing in stocks is a way to make your money grow over time. By regularly putting money aside to invest, you can see its value multiply over the long term. That's why it's important to begin as soon as you have the money to do so—the longer your time horizon, the better. This article takes you through how much you need, what stocks to choose, and the other basics of investing in stocks you need to get started, all in 10 steps. Whether you have thousands set aside or can invest a more modest $25 a week, you have enough to begin.

Key Takeaways

• You can earn more money by working longer hours, getting a raise or finding another job, or turning your money into a growth tool by investing in stocks and letting it work for you.
• Investing carries the chance of losses. But there are ways to lower your risk, though you can't get rid of it altogether.
• New investors have never had so many resources for expert advice.
• You can seek out articles, books, and courses to educate yourself; use robo-advisors, automated apps and platforms, or financial specialists to manage your portfolio; or personally manage your own stock investments.

Begin by reflecting on what you want to achieve financially. You might have short-term goals like saving for a home or a vacation or have long-term objectives like securing a comfortable retirement or funding a child’s education. Your objectives will depend on your life stage and ambitions. Younger investors tend to focus more on growth and long-term wealth accumulation, while those closer to retirement typically prefer income generation and capital preservation.

The more precise you can be about your goals, the easier it will be to sort out the best means to get you there. Here are some tips:

• Be precise about your objectives : Instead of general goals like “save for retirement” or “I don’t want to have to worry about money one day,” set specific objectives like “accumulate $500,000 in my retirement fund by age 60.”
• Set your investment horizon : Determine how long you have to achieve each goal you set. You will have longer and shorter timelines for different purposes. In general, the longer you can give yourself, the less risk you’ll need to take on, and the more viable your objectives will be.
• Evaluate your finances : Be realistic about how much you can allocate toward your investment goals. This includes looking at your savings, regular income, and any other financial resources you can put to work as you begin. We’ll come back to this.
• Rank your goals : Most of us have several goals at once, like saving a down payment for a house, paying for a wedding next year, or preparing for retirement. Prioritize these and balance them according to their importance and urgency.
• Review and adapt to changes in your life : The phrase financial planning is best taken as a verb, not a noun since goals aren’t set in stone, and planning your finances is an ongoing project. You might fall in love or out of it, have many children or none of them, or realize your life’s work is best done in a different place in the country. Life changes, and so will your financial objectives. Regularly review and adjust your goals accordingly.

The first step in any venture is the biggest, but it’s also when you set your aspirations and imagine yourself in a future that your investments in stocks, a touch of luck, and a prudent investment strategy you’ll begin to learn here make possible.

Determining how much you can afford to put in stocks involves carefully and honestly assessing your financial situation. Don't worry if your funds are less than you would wish. Just like you shouldn't berate yourself for not being ready for a race on your first day of training, so too, you're just at the beginning of your investment journey. This is a marathon, not a sprint and you've got a long way to go. Here are some tips for giving yourself an honest appraisal of how much you can use:

• Look at your sources of income : Start with your income. In particular, you'll want to see if your employer offers ways for you to invest while gaining tax benefits or with matching funds that will amplify your own contributions.
• Have an emergency fund : You should have a solid financial foundation before investing, though solid does not mean perfect. Settle on how much you need for emergencies, typically covering major expenses (a few months of mortgage or rental payments, plus your other bills).
• Snuff out any high-interest debts : Financial advisors also generally suggest making sure you've paid down your debts, especially credit cards and anything else with high interest rates. Any returns you expect from trading stocks are unlikely to make back the cost of the high interest rates accruing each month on your credit card statements. If you still owe on your student loans, look at how much interest you pay. Balance that against the returns you expect by investing in stocks, and choose whether it's better to pay your loans down or invest.
• Set a budget : Based on your financial assessment thus far, decide how much money you can comfortably put into stocks. This shouldn't dip into any funds you need for expenses now or down the road. Your budget should determine if you are starting with a large lump sum or investing smaller amounts at set times each month or year.

Investing in stocks carries risk, and it's important to only invest money you can afford to lose. Never put yourself in a financially vulnerable position for the sake of investing. This is what separates investing from some of the worst forms of gambling.

Understanding your risk tolerance is a cornerstone of investing. Gauge your level of comfort with the inherent uncertainties of the stock market. Your risk tolerance will differ depending on your life stage, financial goals, and your financial cushion for potential losses.

Determining your risk tolerance is crucial for crafting an investment strategy that matches your financial goals while keeping your peace of mind. It helps you decide which stocks are suitable for your portfolio and what to do when the market goes up or down. Don't be goaded into being more adventurous than you need to be, or more cautious than called for. Do you prefer stability, or are you willing to accept higher risks and price swings if that means there's the potential for more returns? This self-assessment is key to setting a foundation for your investment journey.

Stocks can be organized by the risk they involve. For instance, large-capitalization (large-cap) stocks are generally more stable since they are well-established, major companies well-known in the market. Small-cap stocks usually offer more growth potential but come with increased risk. Similarly, growth stocks are sought for rapid gains, with higher risks, while value stocks focus on long-term, steady growth, usually with lower risks.

Everyone has a different relationship with money. We've seen how this affects your risk tolerance . But investors also have investing styles that best suits them. Some prefer an active role, meticulously pouring over the last cell on the spreadsheets for their portfolios, while others opt for a hands-off, set-it-and-forget-it approach, trusting their investments will grow over time if they just leave them alone. Some just might not have the time to be active traders following the ticker crawls and latest reports on investing platforms. It's important to recognize that your style might evolve, but you'll need to start somewhere, even if your choice isn't set in stone.

Here are general directions for understanding your investing style:

• DYI investing : If you have a good grasp of how stocks work and are confident to head out with minimal guidance into the market, managing your stock trades is one option. You can set up an account with well-known and trusted online brokers to access a wide range of investment options, including stocks, bonds, exchange-traded funds (ETFs), index funds, and mutual funds. This approach gives you full control over your investments, even if certain choices might be stock funds and the like managed by professionals with a fiduciary responsibility to look after your funds.
• Working with a financial advisor or broker : For those who prefer the more personal approach and want more, an experienced broker or financial advisor can be invaluable. They offer advice tailored to your life experiences and goals, help you decide among the more promising stock choices for you, monitor your portfolio, and collaborate with you when adjustments need to be made.

You've figured out your goals, the risk you can tolerate, and how active an investor you want to be. Now, it's time to choose the type of account you'll use. Each has its own features, benefits, and drawbacks.

Here are the most common:

Retirement Accounts

• Your employee retirement plan : If your employer offers a retirement plan, this is a convenient way to invest in stocks, including potentially those of the company itself. The plans are known by the sections where they're described in the U.S. tax code. The most popular are 401(k)'s (tax-deferred, private employer-sponsored retirement savings), but you could also have a 403(b) (used mostly by nonprofit organizations, public schools, and some churches), a 457 (mostly for state and local public employees), or a similar plan. You contribute to your account automatically each pay period, and many employers offer matching contributions, boosting your investment. Your contributions are tax-deductible, and the account balance grows tax-deferred.
• Individual retirement account (IRA) : You can start investing in stocks by opening an IRA in addition to your workplace retirement plan (if you have one). IRAs provide some tax benefits, and you can choose between a traditional IRA (tax-deductible contributions) or a Roth IRA (tax-free withdrawals in retirement).

Taxable Brokerage Accounts

If you prefer more flexibility or have maxed out your IRA contributions , a regular taxable brokerage account gives you access to various investment options, including individual stocks, stock mutual funds, ETFs, and stock options. While they don't have the tax advantages of retirement accounts, they are more flexible and don't have contribution limits. You can also pick different taxable brokerage accounts as you seek a match for your investment style.

• Individual brokerage accounts : These are standard accounts opened by one person. The account holder has full control over the investments and is solely responsible for any tax implications. The most basic type is a cash account , through which you buy securities using only the money available in your account. You can also have a margin account at a brokerage for more experienced investors who borrow money from the brokerage against their account's value to buy additional stock.
• Joint brokerage accounts : These are shared by two or more individuals , typically spouses or partners, and can be cash or margin accounts. These accounts can be structured as joint tenants with rights of survivorship: if someone on the account dies, ownership passes to the survivor(s).
• Managed accounts : These are professionally managed, and a portfolio manager makes the decisions on your behalf, personalized to your needs, goals, and investment style.

Accounts For Specialized Goals

There might be tax advantages to using different kinds of accounts if you're investing in stocks for specific goals, e.g., for your own or your child's education or health expenses. If so, it's to your advantage to consider these alternatives, which have special tax incentives:

• Dividend reinvestment plan accounts : Some brokers offer accounts that automatically take your stock dividends and use them to purchase new shares, usually without charging commissions for the additional shares.
• Education Savings Accounts : These offer tax advantages when the funds are used for qualified educational expenses.
• Health savings account : Contributions are tax-deductible, and withdrawals for qualified medical expenses are tax-free.
• Trust and custody accounts : A trustee manages trust accounts for the benefit of a third party according to the terms of a trust agreement. In the case of custody accounts, minors can own stocks and other assets, but a custodian manages the account until the minor is an adult.

Commissions and Fees

Besides reputation and fit with your investment strategy and goals, broker fees are the most important consideration when you're choosing a brokerage firm, which comes in the next step. Let's prepare. Traditionally, brokerages have charged fees through trade commissions, account maintenance fees, and fees for additional services like research or financial advice. However, the landscape of brokerage fees has evolved significantly in recent years.  Here's what you'll want to look for as you do your research:

Trading commissions : A broker might charge a commission every time you trade a stock, whether you buy or sell. Trading fees range from $2 per trade to $10. Some brokers charge no trade commissions at all, but they make up for it with other fees. Depending on how often you plan to trade, these fees can add up, affect your portfolio's return, and deplete the money you have available to invest.

Let's see this in action: Suppose you buy one share of stock in five companies with $1,000. Assuming a transaction fee of $10, you will incur $50 in trading costs which is equivalent to 5% of your $1,000. Should you sell these stocks, the round trip (buying and then selling) would cost you a total of $100, or 10% of your initial deposit amount of $1,000.

Maintenance fees : Some brokerages charge monthly or annual fees to keep your account active. These might be waived, though, if your account balance is above a certain threshold.

Service fees : You might pay additional fees if you haven't used your account in a while. Brokers also may charge for services like broker-assisted trades, access to their premium research, and trading on margin (by borrowing). Most of these fees and the services linked to them are optional.

Subscription-based models : As Generation Zers and Millennials take up a larger share of the investment space, financial advisors, planners, and brokers are taking on clients used to month-to-month or yearly fees for apps and app-based services. Instead of paying per transaction or for specific services, you pay a flat monthly or annual fee. Your subscription may include commission-free trades, access to research tools, and other premium support.

Some platforms offer tiered subscription levels, supplying more features or lower margin rates at higher subscription rates. As you would with Hulu or your favorite online magazine, you'll want to keep an eye on how much you're taking advantage of what you're paying for. If not, you might draw down to a lower tier or seek another broker altogether.

Account Minimums

A major change in recent years has resulted from the immense competition among brokerages. Many online brokers have eliminated account minimums, making it easier for a wider range of investors to get started.

This means that if you have just a few dollars to invest, you can still open a brokerage account and begin trading stocks. While some brokerages still require you to deposit substantial amounts before you can become a client, this shift away from very low or no minimum requirements has made investing far more accessible to nontraditional investors and beginners. However, you'll want to assess any minimum a brokerage requires, which is still your money, with transaction fees and maintenance costs that may lead you to decide that keeping a minimum in your account is less costly in the long run.

Brokers  are either full-service or discount. Full-service brokers provide an array of financial services, including financial advice for retirement, healthcare, education, and more. They can also offer a host of investment products and educational resources. They have traditionally catered to high-net-worth individuals and usually require significant investments. Discount brokers have much lower thresholds for access, but tend to offer a more streamlined set of service, allow you to place individual trades, and offer educational tools.

Full-service brokers

These offer a full range of traditional brokerage services, including financial advice for college planning, retirement planning, estate planning, and for other life events. This customized advising justifies the higher fees that they typically charge, normally a percentage of the value of your transactions, a percentage of your assets under management, and sometimes, a yearly membership fee. Minimum account sizes can start at $25,000. 

Discount Brokers

These offer you tools to select your investments and place your orders. Some also offer a set-it-and-forget-it robo-advisory service. Most have educational materials on their sites and mobile apps. Some brokers have no (or very low) minimum deposit restrictions. However, they may have other requirements and fees. Be sure to check on both as you look for a brokerage that's best for your financial situation, and review our Best Online Brokers for Beginners of 2024 .

Robo-Advisors

For an automated solution, robo-advisors or automated investment platforms are cost-effective and pretty effortless when investing. If you select this option, you won't be alone in doing so. According to Charles Schwab, 58% of Americans say they will use some sort of robo-advisor by 2025.

An app or platform takes the information you provide about your financial goals, risk tolerance, income and savings, and so on, and its robo-advisor creates and helps manage your investment portfolio using its specialized algorithms. Aimed at retail investors, robo-advisors are low-cost, usually have little or no minimum balance requirements, and are programmed for strategies suited for new and intermediate investors. That said, they tend to offer fewer trading options and lack the personal approach to financial planning best suited for long-term investing. If this interests you, see our Best Robo-Advisors of 2024 .

Now that you've chosen the type of account to open, you'll have to fund it. Here's what to do:

• Choose a brokerage : First, select a brokerage firm, perhaps one of the major online firms, that aligns with your investment goals and preferences or is simply most convenient for you. Consider factors like fees, available investment options, and the platform's user-friendliness.
• Pick your account type : Decide whether you're opening a cash account, which requires you to pay for investments in full, or a margin account, which allows for borrowing to purchase securities.
• Open your account : Once you've chosen a brokerage and account type, you'll need to open your account. This involves providing your personal information: Social Security number, address, employment details, and the particulars of your financial situation. This shouldn't take you more than 15 minutes.
• Link your bank accounts : The most common way to fund your stock account is by linking it to your bank account. This is usually done online through the brokerage's platform, where you'll enter your bank account number and routing number. Many brokerages allow you to link your account via small test transactions for verification.
• Transfer or deposit your first funds : Once your bank account is linked, you can transfer funds to your brokerage account, typically through an electronic funds transfer, which can take a few days to process. Other options may include wire transfers for faster funding if you're raring to go, though these usually cost more. Some brokerages still accept physical checks. If you prefer this method, you can mail a check to the brokerage or bring it to a physical location.
• Set up periodic transfers : If you plan to make stock buys a habit, consider setting up automatic transfers from your bank to your brokerage account.
• Start investing : Once you've verified the funds are in your account (don't worry: the brokerage won't let you trade otherwise), it's time to start choosing among the stocks that best fit your investment goals.

If you plan to trade frequently, check out our list of brokers for cost-conscious traders.

Choosing the right stocks can be daunting even for experienced investors. Beginners should look for stocks that have stability, a strong track record, and the potential for steady growth. Don't start out of the gate with a risky stock, thinking you'll hit it big right away. Investing for the long term is mostly slow and steady, not fast and rash. Here are some stocks that are solid bets to begin:

• Blue chips : These are shares of large, well-established, and financially sound companies with a history of reliable performance. Examples include companies listed in the Dow Jones Industrial Average or the S&P 500. They are typically industry leaders and offer stability during market fluctuations.
• Dividend stocks : Companies that regularly pay dividends can be a good choice for beginners. Dividends give you a regular income, which can be reinvested to buy even more stock. See How to Buy Dividend Stocks to get started.
• Growth stocks : The greater the chances for outsized growth in a stock, the riskier investing in it will be. Beginners interested in growth stocks should look for industries with long-term potential, such as technology or healthcare.
• Defensive stocks : These are in industries that tend to perform well even during economic downturns, such as utilities, healthcare, and consumer goods. They will give you a buffer against market volatility as you start.
• ETFs : Traded like stocks, these track many indexes or sectors and are a low-cost way to gain exposure to a broad range of assets. You can trade shares in them throughout the day at market prices. These funds often track a specific market index, like the S&P 500, and offer instant diversification, reducing the risk associated with individual stocks. As you gain experience, you can look at funds for sectors that pique your interest, themes that meet your investment goals, or indexes that track environmental, social, and governance stocks to match your quest for returns with your values.

It's prudent to begin with a conservative approach, focusing on stocks or funds that offer stability and a good track record. This will give you confidence and returns to work with as you advance in your investing knowledge.

Investing in stocks is an ongoing learning experience—even the most successful investors are learning new tips and strategies each passing day. As the stock market continually evolves, staying up to date and going back to Step 1 and reviewing your goals, available funds for trading, investment style, and so on, will be key. Here are some final tips for now:

• Read widely and regularly : Consistently visit reputable financial news sites. Keep informed about the global economy, industry trends, and the companies you are invested in. Avoid sites and books promising easy returns or tricks, not tips, likely to redound to their benefit when you buy their courses or apps. Books on investment strategies, stock market fundamentals, and diversification techniques can be essential.
• Use stock simulators : These platforms enable you to practice trading stocks risk-free using virtual money. They are excellent tools for applying investment theories and testing strategies without risk. Investopedia's simulator is entirely free to use.
• Learn about diversification : Having taken your beginning steps here, you'll next want to spread your investments across diverse asset classes to reduce risk and improve the potential for returns. When you're ready, we'll help you learn how to diversify your portfolio beyond stocks .

Just as financial planning is a verb, learning about stock investing is continuous. The more informed you are, the better you'll be able to make wise investment decisions and adapt to market changes.

Choosing the right stocks can be overwhelming for those just starting to navigate the world of stocks and investing—you're starting with a blank slate, and the choices are endless. Here are some that aren't just the best for beginners but are many times the picks of many experts managing their portfolios:

Index funds : One approach that has gained significant popularity in the last few decades is investing in index funds. These are passively managed funds that aim to track the performance of a particular market index. This might have the excitement of picking a stock and seeing if it does well, but index funds take what would be impractical or too expensive for a beginner to do and let you invest in a representative sample of securities. S&P 500 index funds, the most popular in the U.S., mimic the moves of the stocks in the S&P 500, which covers about 80% of all U.S. equities by market cap.

The appeal of index funds lies in their simplicity and lower fees. By mirroring the composition of a chosen index, these funds provide broad exposure to the market without the need for extensive research or stock-picking expertise. According to the S&P Indices Versus Active scorecards, a widely respected benchmark, about 90% of actively managed funds didn't match the returns of the S&P 500 over 10 and 15-year periods. This is stark but winning information for a beginner: the most effortless route might be the most profitable.

Blue-chip stocks : Perhaps the most classic investing advice is to buy shares of well-established, stable companies with a history of consistent growth and dividend payments. The blue chips —named for the traditional color of the highest-value poker chips—often have strong brand recognition, a solid market position, and a track record of weathering economic downturns. Investing in blue-chip stocks can provide beginner investors with a sense of stability and the potential for steady returns over the long term. Examples of blue-chip stocks include Apple ( AAPL ), known for its ubiquitous technology products and loyal customer base; JP Morgan & Chase Co ( JPM ), the banking giant; Johnson & Johnson ( JNJ ), a healthcare giant that also owns manufacturers of many consumer goods; and Coca-Cola ( KO ), the soft drink maker that has announced dividends each year since 1893.

Dividend aristocrats : Coca-Cola is not just a blue-chip stock but also belongs to this select group , which was given this informal name for giving and increasing their dividends for at least 25 consecutive years. By investing in dividend aristocrats, beginners can benefit from the potential for rising income and the chance to reinvest the dividends for compound growth . Examples include ExxonMobil ( XOM ), one of the world's largest oil and gas companies with a history of solid cash generation; Procter & Gamble Co. ( PG ), the consumer products multinational; and Walmart ( WMT ), the retail behemoth.

Low-volatility stocks : These companies' shares have historically had fewer swings in price, providing more stability to portfolios and, not for nothing, investor heart rates. These stocks often belong to "defensive sectors" (recession-proof parts of the economy) such as utilities, consumer staples, and healthcare. Examples of low-volatility stocks include utility companies we've mentioned already (Johnson & Johnson, Coca-Cola, Procter & Gamble, etc.), as well as Berkshire Hathaway ( BRK.B ), Brystol-Myers Squibb Company ( BMY ), Duke Energy ( DUK ), and the Hershey Company ( HSY ), which shows that the love of chocolate doesn't go away when the economy hits some bumps.

Quality factor ETFs : These invest in companies with strong balance sheets, consistent earnings growth, and other indicators of financial health. They use a rules-based approach to select stocks with low debt levels, stable earnings, and high returns. These funds include the iShares MSCI USA Quality Factor ETF, which holds large- and mid-cap U.S. stocks with solid quality characteristics, and the Invesco S&P 500 Quality ETF, which focuses on high-quality stocks within the S&P 500 index .

The potential drawback for each of these investing strategies is that you might not see the outsized growth riskier stocks could provide. Plus, past performance does not determine future results. If you have limited funds, this could be unappealing: more modest returns won't seem to add much when you don't have much to begin with. But over time, reinvested dividends and compound growth add up. Investing is not gambling, and the reason to invest over heading to a Casino is that prudent, patient, and disciplined investing is how, on the whole, most investors get ahead. This means starting with stable stocks in your portfolio. Once you build up your investment account and gain experience, you can consider riskier stocks. Investing prudently now will help you gain the experience to do just that.

How Much Money Do I Need To Start Investing in Stocks?

The amount needed depends on the brokerage firm and the investments you're interested in. Some online brokerages have no minimum deposit requirements, allowing you to start investing with a small amount of money. However, the price of individual stocks and the minimum investment for certain mutual funds or ETFs might require you to start with more of an initial investment. That said, there are many brokerages and investment options now for those starting with less to invest than there were a decade or two ago.

Stock funds, including mutual funds and ETFs that invest in a diversified portfolio of stocks, are a good option for beginner investors. They offer diversification, which helps spread risk across different stocks, and are managed by professional fund managers. In addition, stock funds allow beginners to invest in a broad range of stocks with a single investment, making it easier to get started without having to pick individual stocks. While you watch your mutual fund or ETF investment over time, you will also gain experience about the ebb and flow of the stocks these funds hold, good knowledge that will help you when investing later.

What Are the Risks of Investing?

Investing is a commitment of resources now toward a future financial goal. There are many levels of risk, with certain asset classes and investment products inherently much riskier than others. It is always possible that the value of your investment will not increase over time. For this reason, a key consideration for investors is how to manage their risk to achieve their financial goals, whether short- or long-term.

To open a brokerage account, you don't have to live in the U.S. Many U.S. brokerage firms accept international clients. However, the application process and requirements will differ, including the need for additional documentation, such as proof of identity and residence. There are also some investments and services regulations curtail for those who aren't U.S. citizens, but the experience is very similar. Most major online brokerages in the U.S. accept international clients.

How Do Commissions and Fees Work?

Most brokers charge customers a commission for every trade. Due to commission costs, investors generally find it prudent to limit the total number of trades they make to avoid spending extra money on fees. Certain other types of investments, such as exchange-traded funds, may carry additional fees to cover fund management costs.

Beginners can start investing in stocks with a relatively small amount of money. You'll have to do your homework to determine your investment goals, risk tolerance, and the costs of investing in stocks and mutual funds. You'll also need to research brokers and their fees to find the one that best fits your investment style and goals. Once you do, you’ll be well-positioned to take advantage of the potential stocks have to reward you financially in the coming years.

Internal Revenue Service. " Fact Sheet on College Savings Plans ."

Internal Revenue Service. " Publication 969 (2022) ."

Securities and Exchange Commission. " How Fees and Expenses Affect Your Investment Portfolio ."

Jen Hollers. " Subscriptions and a Sustainable Business in Financial Planning ." Journal of Financial Planning . (August 2023.)

Charles Schwab. “ The Rise of Robo: Americans’ Perspectives and Predictions on the Use of Digital Advice .” Page 3.

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• Investing: An Introduction 1 of 38
• What Is the Stock Market and How Does It Work? 2 of 38
• A Look at Primary and Secondary Markets 3 of 38
• How to Buy and Sell Stocks for Your Account 4 of 38
• Trading Hours for the World’s Major Stock Exchanges 5 of 38
• Types of Stock Exchanges 6 of 38
• How to Invest in Stocks: A Beginner’s Guide 7 of 38
• What Owning a Stock Actually Means 8 of 38
• The Basics of Trading a Stock: Know Your Orders 9 of 38
• How to Reduce Risk With Optimal Position Size 10 of 38
• How Do I Place an Order to Buy or Sell Shares? 11 of 38
• 6 Reasons to Sell a Stock 12 of 38
• Income, Value, and Growth Stocks 13 of 38
• How Do I Keep Commissions and Fees From Eating Trading Profits? 14 of 38
• What Type of Brokerage Account Is Right for You? 15 of 38
• Investing vs. Trading: What's the Difference? 16 of 38
• Stock vs. ETF: Which Should You Buy? 17 of 38
• Why Would Someone Choose a Mutual Fund Over a Stock? 18 of 38
• ETF vs. Mutual Fund: What's the Difference? 19 of 38
• Bonds: How They Work and How To Invest 20 of 38
• Bond Yield: What It Is, Why It Matters, and How It's Calculated 21 of 38
• 4 Basic Things to Know About Bonds 22 of 38
• How to Buy Bonds: Corporate, Treasury, Municipal, or Foreign 23 of 38
• How to Invest in Corporate Bonds 24 of 38
• Introduction to Treasury Securities 25 of 38
• The Basics of Municipal Bonds 26 of 38
• What Are the Risks of Investing in a Bond? 27 of 38
• Options vs. Futures: What’s the Difference? 28 of 38
• How to Trade Stock Options 29 of 38
• The Importance of Diversification 30 of 38
• How to Calculate Your Portfolio's Investment Returns 31 of 38
• What Are Corporate Actions? 32 of 38
• Why Dividends Matter to Investors 33 of 38
• What Are Stock Fundamentals? 34 of 38
• 5 Essentials You Need to Know About Every Stock You Buy 35 of 38
• Sector Breakdown: What It Is and How It's Used 36 of 38
• How to Analyze a Company's Financial Position 37 of 38
• Technical Analysis: What It Is and How to Use It in Investing 38 of 38

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Sozzi: under armour is collapsing, and plank has to take the blame, bruce nordstrom, of family-led department store chain, dies at 90, secondhand rolex sales surge in 'underdeveloped' us market, how to prepare for social security's shaky future, dow at 40,000: why stocks still have 'plenty of room to run', russia oil refinery hit as moscow troops press kharkiv region, wreckage of iran president’s helicopter seen, state media says, gold hits record high on fed rate-cut hopes, rising haven demand, japan’s 10-year bond yield hits decade-high amid boj policy bets, oil prices climb amid uncertainty over iran president's fate, norinchukin weighs $7.7 billion fundraise to cover bond loss, asian stocks rise fueled by chinese policy support: markets wrap, chinese banks keep lending rate unchanged after pboc hold, oil steadies after weekly advance as geopolitical risks flare, the big questions jpmorgan investors have for jamie dimon, amid uncertainty around social security, here's what financial advisers are telling clients, trading stocks all day and all night might be an 'inevitability' for investors, gas prices expected to jump this summer on refinery constraints, netflix's nfl deal highlights streamer's 'natural evolution' as sports rights take center stage, student loan interest rates rise: how affordable is college now.

Student loan interest rates will be at a decade-high as the Department of Education released its rates for 2024 to 2025, raising it 6.53%. To talk about the financial impact this will have on students seeking to attend college, Scholly By Sallie Founder Christopher Gray and Student Loan Expert Mark Kantrowitz join Wealth! Kantrowitz says overall it's "not a huge increase," while Gray touches upon the importance of scholarships and free money qualifications for prospective college students. Technical difficulties in revised FAFSA (Free Application for Federal Student Aid) forms have left many wondering if they can even afford college at this time. Both Gray and Kantrowitz — the latter being the authors of How to Appeal for More College Financial Aid — discuss the challenges many loan borrowers face while struggling to keep up with loan rates and acquire the necessary skills in school to find equitable employment. For more expert insight and the latest market action, click here to watch this full episode of Wealth! This post was written by Luke Carberry Mogan.

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The US national debt sits at a record $34.5 trillion

The figure could represent 166% of GDP by 2054.

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Direct mail hasn't died off all the way. Marketers are all focused on online methods so they're not bothering with direct mail anymore. By going this route, you are more likely to stand out since many marketers ignore it. Try it and see if direct mail works for you.

Think about your consumers and what they are looking for when they are considering your product. An example might be someone who is in a rush to buy a home, and if you're a real estate agent you would need to advertise to these types of urgent buyers. Those who might be downsizing will need a more comforting pitch.

Research any company that is going to sell you a lead. You can easily get swayed by a great deal; however, it can be too good to be true. The key is to make sure that the lead purchase will focus on leads that fit your demographic needs and customer base.

Gathering leads from your website needs traffic. Traffic building is what any site needs, but even more so if your site is also set to generate leads. Make sure that you target traffic for your products and services, but also take the time to push traffic for your lead generation as well.

Remember that trending on social media isn't the be-all and end-all of marketing. If you can get any positive buzz at all about what you're selling, you're generating leads. When using social media, the content is king as long as you present it in a way which doesn't sound like spam.

Try direct mail as a lead generation tactic. Many people think that direct mail has gone the way of the dinosaur, but it's not true. In fact, it may be very powerful for your market as a lot of competitors shy away from it as a strategy. You may find a lot of business opportunity here.

Don't fall victim to the belief that generating leads requires a big budget, because it doesn't. Talking to people over the Internet is very economical and you can be very effective if you know how to do it. Target your audience precisely, perfect the call to action and make it as easy as possible for people to plug in to your offer.

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Analyze the numbers surrounding your lead generation. Are you finding it takes lots of hours to discover potential leads? Are these leads qualified or rather weak? Measure the time you have in versus the conversion rate. This will help you decipher which tactics give you the best return on your investment.

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Look for online marketplaces that cater to your niche. For example, real estate agents can use realtor.com to find leads. You can even post classified ads to sites like Craigslist or Kijiji. Check out forums as well as you never know who else might be reading there, but don't spam!

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Effective Communication skills is a complicated two-way process. It happens when one individual conveys thoughts (or feelings) to another person - or group of people. The Effectiveness with which this process is completed could be measured by assessing the similarity between the message as it had been initiated and when it was obtained. Effective Communication abilities is the tool direction uses to get things done. Without it, a manager is as ineffectual as a carpenter without his kit of resources. Although it is a management skill, communication is also a vital part of all other management abilities. After a supervisor has established organizational goals, developed reasonable predictions, made plans, established the organizational structure, and acquired personnel needed, nothing happens when he is not able to communicate efficiently with his or her people. The amount of success in attaining assignments of the organization is contingent upon the clarity of his announcement of the roles and missions - upon his ability in transferring the concept to other people in the business. The manager must communicate the content of his message, and convey a positive attitude to people who receive it. Communication Has been described by some as an atmosphere. If the atmosphere isn't favorable, misunderstandings happen and inefficiency or even failure benefits. The best advice one could give to a manager, who wishes to make a receptive atmosphere, would be to indicate that he talk or write as he'd love to be spoken or written to. In our everyday Lives, we play the functions of transmitter (origin of this message) and recipient again and again. We're judged by how we carry - by speaking or writing - the message and from the way we hear it or assimilate that which we read. The effective manager, through ability in communications, can lead the members of the organization to play their necessary roles. This powerful Communication skills direct, devoted to communicating efficiently, will cover oral (listening) and written (studying ) input, in addition to oral (speaking) and written (writing) output. Of course, there are also hybrid inputs and outputs that should be recognized. A written input signal is received aurally whenever someone reads to us. The converse of this is when people receive the oral output of composed material, like if a speaker"reads" his newspaper. Among the most Useful hybrids is that the oral production of written material, commonly referred to as"dictation." The transmitter Of the message starts the communication process by deciding what information to convey with other people. It is his obligation to make sure the information to be transmitted is objective and correct. To begin with he composes the message within his thoughts, according to past experience. He organizes it in a logical sequence so that the receiver will know it easily and not receive a message that is twisted. Before proceeding, however, he makes a quote of this understanding the receiver has of the topic so that he can communicate it in terms most understandable to the recipient. Finallyhe chooses the ideal method for distributing the message. The message can Be transmitted; in writing; by"body language," as with gestures or expressions; or with a combination of spoken phrases and physiological activities. The best means To transmit the message usually is contingent upon the situation at any particular time. By way of instance, a manager with a broadly dispersed organization would likely communicate in writing, whereas the manager of a small office might communicate orally with his staff. The message, Its composition, and also the means of transmittal are crucial to achievement in the communication procedure. The recipient of the message must have the ability to understand and"decode it" If the receiver doesn't pay proper attention to this message, the information can get distorted. The receiver can guard against such distortion by being goal in their own interpretation of what he receives. The issues of Transmitting a message from manager to subordinates, and of their forwarding it to others without distortion, is clearly illustrated in this story which made the rounds a few decades ago. The author and name are unknown, but also for illustrative purposes it could be identified as"Operation Halley's Comet." A colonel Difficulties The following directive to his executive officer: Tomorrow day, approximately 2000 hours Halley's Comet will be visible in this region, an event that occurs only once every 75 years. Have the men fall out in the battalion area in fatigues, and I will explain this rare phenomenon to them. If it rains, we won't be able to see it. If that's the case, assemble the guys in the theater and I'll show them films of it. Executive Officer to business commander: As a result of the colonel tomorrow at 2000 hours, Halley's Comet will appear above the battalion area. When it rains, have the guys fall out from fatigues and march into the theater where this rare phenomenon will take place, something which happens only once every 75 decades. Company Commander to lieutenant: By order of the colonel at fatigues, at 2000 hours tomorrow night that the phenomenal Halley's Comet will appear in the theater. If it rains in the battalion area, the colonel will give another order, something which happens only once every 75 years. Lieutenant to Sergeant: Tomorrow at 2000 hours, the colonel will look in fatigues from the theater with Halley's Comet, something which happens every 75 decades. If it rains, the colonel will order the comet into the battalion area. Sergeant to Squad: When it rains tomorrow at 2000 hours, the phenomenal 75-year-old General Halley, accompanied by the colonel, will push his Comet through the battalion area theater in fatigues. This Exemplifies the distortion that could happen if a message is passed along verbally through a lot of men and women. In this circumstance, the orders could have been clearer to people below the colonel's command if he'd printed the orders. They could have been read straight - and with no interpretation - by all who had a need to understand. Feedback is a Very significant part the communication process. It becomes the transmitter's Understanding of the results or consequence of the message on the receiver. In short, Feedback is response. For example, when a manager tells a poor about a Recent briefing at higher headquarters, he expects to find some kind of reaction To what he's saying. From the foregoing narrative, the colonel led that something be done. He expected to see his order carried out.

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The meme-stock rally is dead as reality sets in amid GameStop's warning on revenue and plan to sell 45 million shares

• GameStop's meme-stock rally officially ended on Friday after the company announced plans to sell 45 million shares.
• The struggling video game retailer also said it expects a 29% decline in first-quarter revenue compared to last year.
• GameStop said the extreme rally in its stock does "not appear to be based on the underlying fundamentals of our business."

It was fun while it lasted. 

This week's meme-stock rally that sent shares of GameStop surging as much 271% is done. 

GameStop stock plunged as much as 29% on Friday to $19.70, down 70% from its intra-day high on Tuesday, and trading at the levels seen last Friday before the @TheRoaringKitty X account posted a meme that sparked a resurgence in the stock.

The rally in GameStop shares came to its sputtering conclusion on Friday when the struggling video game retailer announced plans to sell 45 million shares in an at-the-market offering, which could result in massive dilution for existing shareholders.

This type of share sale allows GameStop to, at its discretion, sell shares directly in the open market to willing buyers to raise capital, with an upside limit of 45 million shares. This is the same type of share sale agreement that allowed AMC Entertainment to take advantage of this week's meme-stock rally and raise $250 million in capital.

The only problem for GameStop is it appears too late for the company to take advantage of this week's meme stock rally, with all of its stock gains having been evaporated.

In a filing made with the SEC, GameStop said it expects first-quarter revenue to decline nearly 30% year-over-year to a range of $872 million to $892 million, and that it expects to see a net loss of $27 million to $37 million.

GameStop also said the company has experienced no fundamental change in its business that would explain the week's massive price surge.

"We did not experience any material changes in our financial condition or results of operations that would explain such price volatility or trading volume. Furthermore, since January 2021 through the date hereof, the market price of our common stock has seen extreme price fluctuations that do not appear to be based on the underlying fundamentals of our business or results of operations," GameStop warned investors in the prospectus tied to its share offering.

The company offered a sobering note to anyone interested in its stock: 

"Investors that purchase shares of our common stock in this offering may lose a significant portion of their investments if the price of our common stock subsequently declines," GameStop said. 

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A market-predicting strategist warns that chasing this record rally is a mistake — but investors can still score strong long-term gains by following this 6-part strategy

• This stock market rally may be short-lived, market strategy chief David Lundgren warns.
• Investors should brace for a near-term pullback within a long-term bull market.
• Lundgren outlined a six-part investing strategy with volatility likely to rise later this year.

Rally-calling strategist David Lundgren is confident that US stocks are on the right track.

"We should be anticipating higher highs in the market," Lundgren, the chief market strategist at MOTR Capital Management & Research and a portfolio manager at Little Harbor Advisors, recently told Business Insider.

The 28-year market veteran's upbeat sentiment is more widespread now than last fall , when the S&P 500 struggled mightily before a powerful end-of-year surge.

All three of the top US stock indexes reached record highs in mid-May following a sharp but brief sell-off in April. However, Lundgren noted that modest market breadth suggests there's room for stocks besides the large-cap growth leaders to rise.

"The average stock is still, arguably, not participating," Lundgren said. "So we still have a very bifurcated environment where large caps are very much favored — in particular, mega caps. But those are all nuances beneath the surface that can distract us from the bigger picture, which is that this is a bull market."

Stay patient, and pounce when there's a pullback

Although Lundgren is a firm believer in the long-term bull market, he cautioned against chasing this rally. Instead, he'd recommend waiting for a drawdown before buying.

"This is not a good time to be loading the boat and getting super bullish right here," Lundgren said. "I'd rather get bullish when the market's oversold."

Lundgren makes market calls and investment decisions based on the market's momentum instead of trying to outsmart his peers . He tries to swim with the tide instead of going against it, though he occasionally has to take a tactical approach if he senses that a reversal is afoot.

"The way I think about it is that the market's the best macro strategist on the planet, and it has a very good record of being able to identify good versus bad conditions prospectively," Lundgren said.

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While investors may have moved past the S&P 500's 5.5% pullback in early April, Lundgren thinks they should stay wary and watch for a similar drop in the coming weeks or months. He didn't say when a rally-snapping drawdown would arrive — only that history says it's inevitable.

"We did do a lot of damage to the shorter-term trends, which means that the next rally that we get is likely to be just part of what I think is — the market's likely gone into a corrective period," Lundgren said.

There can be negative or positive stretches within an established bull or bear market, Lundgren noted. He keeps an eye on weekly and quarterly charts to track these discrepancies, and what he sees now doesn't make him optimistic.

"We have a setup that's similar to what happened in the fall of last year , where we have this sort of churn, sideways price action for the next several months," Lundgren said, adding that the market choppiness can persist into the US election season.

But despite his trend-following tendencies, Lundgren also has a contrarian side. The strategy chief advises adding to stock positions when the next downturn arrives.

"If we get a 5% pullback, you should be using that as an opportunity — as painful as it is — because the behavioral bias is now that we've rallied, now you want to buy it," Lundgren said. "The way we should be thinking about it is, when you get the 5% pullback, that's the worst time to be selling, and that's the best time to be buying — not after we've already had a 5% rally."

Follow this 6-part investing blueprint in a pullback

Last fall, Lundgren highlighted five economically sensitive sectors he expected to outperform.

Those five cyclical groups are still his favorite parts of the market, he said, as are financials , consumer discretionary , energy , industrials , materials , and technology . His research indicates that those sectors have the strongest technical momentum.

Since the start of September, which is right after Lundgren greenlighted those latter five groups, four popular exchange-traded funds (ETFs) built to track those sectors have trailed the S&P 500. Only the Technology Select Sector SPDR Fund ( XLK ) has outperformed the index.

However, Lundgren is focused on the performance of sectors on an equal-weight basis, while those ETFs give more sway to larger companies. When adjusting for market cap, cyclicals have fared much better and have bested the equal-weight version of the S&P 500 in several cases.

Even though the longtime strategist is concerned about the market's near-term trajectory, he's sticking with economically sensitive stocks — not the defensives that tend to fare best during drawdowns. Lundgren is confident risks are already priced in, and if not, he'll adjust accordingly.

"We might have a lot of apprehension about what we see on the horizon, but there's nothing that we see that the market doesn't see," Lundgren said. "And there's a whole bunch of stuff that the market sees that we don't see."

Watch: Antonia Wade, PwC's global CMO, tells Insider how B2B spending changes in tough economic times

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Exclusive: Musk pushes plan for China data to power Tesla's AI ambitions

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• Tesla develops plan for data center in China
• But also seeks to transfer EV driving data to US
• Tesla would need local partner for China data center
• China data key to Tesla's pivot to AI

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Italian fiscal police seized more than 130 Fiat cars imported from Morocco this week on the grounds that a sticker with the colours of the Italian flag on their doors could give a false indication of their origin, a spokesman for Stellantis Italia said on Saturday.

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How annual bird migration could spread avian flu

Scientists are still trying to understand exactly how a virulent bird flu is spreading through farms in the United States, but one pattern is clear: poultry and cows risk exposure to sick wild birds migrating across the Americas.