Here, we’ll give the top 5 advantages of trading for yourself to keep you motivated on your journey in becoming a successful trader.
#1 Your profits are your profits
The most obvious advantage of trading for yourself: You keep what you make in the market. Well, except for the taxes. Still, you’re the master of your destiny and decide what instruments to trade, how much to risk, how long to hold your trades, and when to monitor them.
Unlike trading in a prop trading house, bank, or hedge fund, where traders have to follow strict rules on how much to risk, when to trade, and what to trade, traders who trade for themselves are completely free to make all decisions on their own.
One of the most important reasons why so many traders are attracted to trading is freedom, and trading for yourself gives you the freedom to work wherever and whenever you want. It’s your money and only you’re responsible for it. Nevertheless, it still takes a lot of discipline, dedication, and experience to become a successful trader, but in the end, the results are well worth it.
#2 Learning from your losing trades
Trading is not only about winning trades and watching your account grow. Losses are an integral part of it and there is no way to avoid them. The most successful traders embrace losses as a situation to learn and grow: There is no better way to sharpen your trading skills than making mistakes.
It takes experience to handle losses without emotions, which is why many traders are profitable on their demo accounts but fail to replicate those results once they switch to a live trading account. Just understand that losses can’t be avoided, trading is a game of probabilities where we can’t control the outcome.
Even with a losing trade here and there, successful traders are still able to make a profit by having, on average, higher profits on winning trades than losses from losing trades. You can have an edge over other traders even with a success rate of 50% if you learn how to control your risk, let your winners run, and cut your losers short.
#3 No need to justify your decisions
Another major benefit of trading for yourself and not for someone else is that you don’t have to justify your trading decisions.
Take for example a trader who manages a pool of funds from outside investors: Besides the additional pressure of handling outside capital and making a return on it, the trader also has to justify his trading decisions to his investors, especially when a trade goes south.
You don’t have that pressure when trading for yourself. Although all of your trading decisions still have to be sound and based on a well-round trading plan, the only one to whom you are reporting is yourself. Especially if you’re just getting started and still don’t have much trading experience, this is the best time to fine-tune your trading strategy and learn from your mistakes.
#4 Building your own trading plan and executing it
Trading for yourself allows you to design your own trading plan and follow it in the way you want. Not having a supervisor behind your shoulder means more freedom to pick a trading style and build a strategy that suits your personality.
If you believe in trend-following, go for a trend-following strategy and only trade markets that show strong and long-lasting trends. If you want to scalp on short-term timeframes, you can do it when trading for yourself. If longer-term swing trading or position trading is more appealing to you, simply go for it.
Trading for yourself gives you the freedom to trade what you want, how you want.
#5 Markets are fascinating
One of the less-known and subtler advantages of trading for your own account is that you get to experience the fascinating world of trading through your own lenses. Markets are both tremendously complex and simple at the same time. There are hundreds, if not thousands of influences that affect prices at any time, but the underlying force of any price movement is human behaviour and emotions.
It’s fascinating to see how fear and greed reflect in the markets, how investor optimism drives markets higher and pessimism lower. Trading for yourself allows you to fully absorb those interesting nuances of the market, without pressure to take a trade or to make a return for outside investors.
You need to love trading to be successful at it.