Business plan for a forex company

The Forex Investing Business Plan.

By: Charley Warady.

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Risk Disclaimer: DailyForex will not be held liable for any loss or damage resulting from reliance on the information contained within this website including market news, analysis, trading signals and Forex broker reviews. The data contained in this website is not necessarily real-time nor accurate, and analyses are the opinions of the author and do not represent the recommendations of DailyForex or its employees. Currency trading on margin involves high risk, and is not suitable for all investors. As a leveraged product losses are able to exceed initial deposits and capital is at risk. Before deciding to trade Forex or any other financial instrument you should carefully consider your investment objectives, level of experience, and risk appetite. We work hard to offer you valuable information about all of the brokers that we review. In order to provide you with this free service we receive advertising fees from brokers, including some of those listed within our rankings and on this page. While we do our utmost to ensure that all our data is up-to-date, we encourage you to verify our information with the broker directly.

Business Plan for Forex Brokerage Company.

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How to Create a Business Plan for Your Trading.

“Plan your trade and trade your plan”

“Treat trading as a serious business”

“Bulls win, Bears win, Hogs lose”

How many times have we heard/read those words, or something to their effect? Trading can be as unstructured and wide-open a venture or a structured and quantified approach as we dictate conditions and parameters for.

There are two general schools of thought when it comes to operating a trading method or approach. One side believes we should trade every minute of every day, trying to maximize all potential profit opportunity without missing a beat. Another side believes it is prudent to target specific goals and if hit, bridle back or shut down for the duration until next period arrives. In other words for intraday traders, trade all day every day or trade for x-dollar profit and call it a day until next session.

That’s a two-side discussion which will never find everyone in agreement. Common logic (coupled with human greed) points to the fact that some sessions or periods offer outsized profit potential. It’d be foolish to quit early and pass up large gains when presented. The competitive nature ingrained in most gamblers (gamers = game) who are likewise successful traders scoff at the notion of walking away while cards remain on the proverbial table. Anyone who has traded through periods of high volatility and extreme price action for days or weeks at a time can attest how easy it is to amass weeks’ or months’ worth of gross profit in rapid fashion there. Then there is the aspect of judging trader performance based on potential profit opportunity. If a session or stretch of time offers x-percent profit potential, a trader would be successful only if he/she realized y-booked gains.

All true to various extents. But no trading career is ever based on extreme market conditions. High volatility and large-range sessions are a welcome gift when presented. A brief, welcomed gift. Unfortunately, that end of the bell-curve measuring “normal” price action is no more common than dull periods with tight-range choppy price action as well. Results realized through any extended periods of time include brief blips of wild markets and huge profit potential, what we’d consider normal market movement as the bulk of time and likewise dull market action to offset the wild times before.

What if we opted to construct a business plan based on steady, consistent performance objectives that are reasonable to meet on a regular basis? Instead of grading our performance relative to max potential gains every day, what if we graded performance on achieving reasonable goals averaged consistently over extended periods of time?

As an example, here’s a business-plan objective created for one trading application of my own. Let’s look at that and see if any benefits exist:

ES Trading Business Plan.

Trading S&P 500 futures (ES) based on (your choice) method approach with management objective of realizing (your choice) gross profit per session. Trader’s option to continue trade efforts that day if conditions warrant OR shut down with profit objective goals successfully met. Regardless of how or why, cease all trading efforts if/when max loss intraday of (your choice) is hit.

+4pts ES gross gains (example) targeted daily.

-8pts ES gross loss (example) max loss shutdown.

$5,000 beginning balance = two ES contracts per full-trade size position.

1/2 size = one ES contract.

full size = two ES contracts.

2x size = four contracts.

100% Objective Attained.

ES +4pts daily x 21 trading sessions (on average) per month | +84pts ES per month.

+4pts x two contracts full position | +$400 daily gross gain.

+$400 daily gross gain x 21 trading sessions | +$8,400 monthly gross gain (+168% monthly = +2,016% annualized r. o.i)

50% Objective Attained.

ES +2pts daily x 21 trading sessions (on average) per month | +42pts ES per month.

+2pts x two contracts full position | +$200 daily gross gain.

+$200 daily gross gain x 21 trading sessions | +$4,200 monthly gross gain (+84% monthly = +1,008% annualized r. o.i.)

25% Objective Attained.

ES +1pt daily x 21 trading sessions (on average) per month | +21pts ES per month (+42% monthly = +504% annualized r. o.i.) +1pt x two contracts full position | +$100 daily gross gain.

+$100 daily gross gain x 21 trading sessions | +$2,100 monthly gross gain.

In my opinion it’s unrealistic to think that anyone can frequently and consistently capture large percentages of intraday potential profits. Needless to say, just about everyone has toyed with a progressive table at one time or another and pondered possibilities. Start with a few dollars, compound that for awhile and sooner than later we’re talking gazillionaire. How much fun that would be. But that isn’t the true strengths of a progressive table as demonstrated above.

What if we held ourselves accountable to the concept of steady, consistent performance unattached to market behavior? In other words, if we manage to accomplish even 25% of that stated objective on a yearly basis, would that alone be considered a success? If so, would it make sense to judge our individual performance against any other measure? Too many times a trader will be their own worst boss when it comes to judging performance. Holding oneself accountable to unreasonable standards only leads to one end: mental self-destruction. You’ll literally drive yourself insane trying to achieve goals set outside of reasonable reach.

On the other hand, if we can visually see that small to modest incremental growth does lead to potential results acceptable enough in the end, that can serve as a guideline of measure to keep us grounded. Considering the very top-rated futures CTAs manage to attain roughly 200% annual returns, is it reasonable to believe anything similar regardless of initial start-up capital is equally admirable? Retail traders who begin with $5,000 and end with $25,000 total without compounding at year’s end accomplished the exact-same mathematical feat as professional CTAs who began with $500,000 and ended with $2.5 million. The sole difference is perception… aka “spendable” dollars in the end. There may be slight to vast differences when in comes to emotional management with small accounts versus large, but the science or math goes unchanged.

Traders need some sort of measuring stick to follow as a guide for measuring performance and production. It cannot be ridiculously low or unreasonably high to achieve. The term “reasonable” always returns to mind. Basing some type of table on personal ability, potential from market(s) traded and other known variables are pulled together for comparative measure. That type of baseline gives us permission to target realistic goals rather than unrealistic or even unstructured goals of performance. Many traders desire while others eschew such business plans. In the end we’ll all end up somewhere. How we get there and why is up to each of us along the way.

Austin Passamonte is a full-time professional trader who specializes in all commodity markets. Mr. Passamonte’s trading approach uses proprietary chart patterns found on an intraday basis. Austin trades privately in the Finger Lakes region of New York. Click here to visit CoiledMarkets.

About Austin Passamonte.

Austin Passamonte is a full-time professional trader who specializes in E-mini stock index futures and commodity markets. Mr. Passamonte’s trading approach uses proprietary chart patterns found on an intraday basis. Austin trades privately in the Finger Lakes region of New York.

You can find more of Austin's work at his website CoiledMarkets .

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Company Info.

The Connors Group, Inc.

10 Exchange Place, Suite 1800.

Jersey City, NJ 07302.

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© Copyright 2017 The Connors Group, Inc.

It should not be assumed that the methods, techniques, or indicators presented in these products will be profitable or that they will not result in losses. Past results of any individual trader or trading system published by Company are not indicative of future returns by that trader or system, and are not indicative of future returns which be realized by you. In addition, the indicators, strategies, columns, articles and all other features of Company's products (collectively, the "Information") are provided for informational and educational purposes only and should not be construed as investment advice. Examples presented on Company's website are for educational purposes only. Such set-ups are not solicitations of any order to buy or sell. Accordingly, you should not rely solely on the Information in making any investment. Rather, you should use the Information only as a starting point for doing additional independent research in order to allow you to form your own opinion regarding investments. You should always check with your licensed financial advisor and tax advisor to determine the suitability of any investment.

HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING AND MAY NOT BE IMPACTED BY BROKERAGE AND OTHER SLIPPAGE FEES. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER - OR OVER-COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.

The Trading Business Plan and Risk Analysis.

One of the best things you can do as a forex trader to assure your long term survival in the business is develop a sound and objective trading plan and the discipline to stick to it.

Going through this important process will help you overcome the emotional responses to trading that have been the downfall of so many novice traders.

Once you have developed a good trading plan that you think you can trade in a disciplined way, another good idea is to put all of your trading-related plans and ideas together into an overall trading business plan.

Benefits of a Forex Trading Business Plan.

Even if you have been trading for a while, but have not yet written down a trading business plan, you can still derive considerable benefits from doing so even now.

Producing a business plan will help you review and solidify your personal trading business activities and goals.

Another major advantage of having a business plan is that if your trading business plan still looks good after its initial testing and trading period, you might even be able to use it to find new investors to put money into your trading business.

Having more funds to trade with can help you access better trading spreads, information, customer service and ultimately, better and more profitable trading opportunities.

Components of a Trading Business Plan.

Your forex trading business plan does not need to be complex. At a minimum, it should contain your forex trading plan, how you intend to manage any money invested, and a risk assessment of your engagement in the business.

Additional components of a trading business plan might include:

(1) What the competition is doing.

(2) Necessary start up and running costs of your trading business.

(3) The equipment necessary for your business to start operating.

(4) How you plan on running your trading activities in detail.

(5) How invested money will be held and managed within your trading business.

(6) What you plan on achieving with your trading business in terms of profits and meeting other goals.

(7) An overall risk/reward analysis showing that your trading business makes sense.

Most of the above trading business plan items are relatively self-explanatory; however the risk/reward analysis mentioned in item #(7) will be covered in greater detail in the following section.

Assessing the Risks of Your Trading Business.

If you honestly believe that your trading business is worth pursuing, then it really cannot hurt to take a closer look at it from a risk/reward perspective. You can do this by assessing as objectively as possible what risks the business might face and what rewards you can reasonably expect to gain from pursuing it.

Furthermore, since some risks might occur with a greater probability than others, they can be weighted in a risk analysis according to their probability of happening. You can then multiply that weight by the potential size of risk involved to get a probability weighted risk exposure.

To get the overall risk/reward profile of your business, you would then sum up all of the risks and compare them to the rewards to see if your business makes sense.

Not only is such a business risk/reward analysis well worth doing, but it makes up an important part of your trading business plan that would ideally be created before you even make your first trade.

Many potential investors will want to see this risk/reward analysis information to help them assess whether your trading business stands a good chance of success for the risk you will be taking.

Risk Statement: Trading Foreign Exchange on margin carries a high level of risk and may not be suitable for all investors. The possibility exists that you could lose more than your initial deposit. The high degree of leverage can work against you as well as for you.