Page 9 - Trading #101 Course – Part THREE: SETTING UP YOUR BUSINESS – www.traderscoach.com

TRADING #101 COURSE – PART THREE: SETTING UP YOUR BUSINESS – WWW.TRADERSCOACH.COM

this means that the trader must be fully away of the nature of the business and the risk
involved and must be comfortable with that risk.

At other times, an individual will structure this a s a business venture. The trader will
have to fund and capitalize this start-up business with risk capital that may or may not
be independent from personal net worth. As with any new business venture, there is an
inherent high risk of failure. This must be taken into consideration.

What is Your Risk Tolerance?

Traders and investors are not all created equal, and we have different tolerances for
risk. The key is knowing yourself. If you experience symptoms of anxiety, fear and
general discomfort with your current approach or trading account size – you need to
listen to those symptoms.

Possibly you are not confident in your approach and need further testing to prove that it
will be profitable before trading with actual money. Or, maybe your trading account size
needs to be smaller, to create less anxiety over losing money.

On the other hand, your personality might be one of needing more action and being
comfortable with risk. Losses may not negatively affect you, and in trading there are
always losses. Build your plan so that your wins out weigh your losses consistently.

After some introspection, this is where you ask yourself, what is my risk tolerance? Only
you can answer this question. Remember, without risk there is no opportunity. So, you
must be comfortable with some amount of risk, even if it is low risk.

Creating and Visualizing Your Financial Profile

Knowing yourself and where you stand financially is important in any business
endeavor. The following exercise will enable you to visualize where you are now, and
how you will structure your trading business.

Fill out your financial profile by drawing a triangle on a piece of blank paper. Label the
points of this triangle by starting at the top and moving clockwise as:

(1) your net worth
(2) your tolerance for risk
(3) your age

In the center of the triangle write:
(4) your trading account dollar size.

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