Stock Market Trading as a Business

Stock Market Trading as a Business

The cost of business should be considered part and parcel of your monthly profit. If you subscribe to various services like data feed (such as SharesScope or eSignal), software, news…etc, then all this is costing you money.  So at the start of the month you are already behind.

There is also a relationship between your trading account size in relation to your cost. Let’s assume that your trading account is £5000 and you are sufficiently skilled to make a 10% return using a margin trading strategy using CFDs. Note that even this type of modest return is nowhere close of being easy.

If we then say that your cost of business is £50 then we can work out some figures -: Cost of business as % of account – 1% Cost of business as % of profit – 10% Now, why is this important?  The more you save on costs, the higher your return is without breaking a sweat. The more active you are as a trader the more the costs are likely to add up in the long run. How much should you use as a guide?  I would use month’s profit / 21 days. So your £500 / 21 = Total cost should not be much more than £24. There has to be some relationship between your expected return and work put in.

Realistic to Start Out with $300? Now for people just starting out. You have seen ads from spread betting/forex and CFD brokers that you can start with $300 /£150.  This is just silly. You could work your way up with this amount but what you need to keep in mind is that your return would be so low that there might not be much incentive to look at this as a business like any professional trader would do. Would you be happy to put in some hard work to make a profit of £5-10 few times a week? And we are back to the cost again with lower account size the lower your cost needs to be. 5000 maximum cost will be £24 2500 maximum cost £12 1250 maximum cost £6 625 maximum cost £3 313 maximum cost £1 If your return was 20% per month you could double your cost but as you may have seen there are various solutions offered to traders and almost all cost more than £10 per month.