Entrepreneurs who are building startups often explore all available options to raise funding to actualize their dreams. Many look to VCs, crowdfunding, friends, family, and fools, and life-savings. Some of the unconventional means of raising funding include personal loans and trading binary options, forex, or spread betting.
We could discuss at length about the pros and cons of trying to raise startup funding by trading the financial markets. However, I am more interested in some of the valuable skills that startup founders can learn by trading the financial markets. Even if you are not comfortable with the idea of raising funding by trading the financial markets, you should still consider opening a demo account where you can practice trading to gain valuable skills without actually risking a dime.
Even if you are not comfortable with the idea of raising funding by trading the financial markets, you should still consider opening a demo account where you can practice trading to gain valuable skills without actually risking a dime.
1. The art of patience
The first lesson that startup founders can learn from trading financial assets is the art of patience. You won’t become an overnight millionaire by trading stocks, binary options, forex, or commodities. Successful traders dedicate hundreds of man-hours to learning and understanding how the market works. You’ll also need the patience to wait for the trading indicators to align before you initiate a trade even when they are itching to start placing trades.
Many startup founders have big dreams of becoming viral successes overnight. However, in most cases, the founding team will need to devote time, energy, and resources to doing the grunt work without recording any remarkable progress in their plans. Founders also need the patience to study their industry and potential competition in order to master the art of timing.
2. Insight from hindsight for foresight
Losing money is a normal part of trading – successful traders tend to have more winning trades than losing trades. However, most successful traders will tell you that they have learned more from their losing trades than from their winning trades. In essence, traders tend to develop an uncanny ability to look at their trading performance in hindsight to make proactive trading plans for the future.
As a startup founder, you’ll inevitably make a number of poor decisions – deals with VCs, wrong hiring, wrong product, or wrong timing among others. However, the survival and success of your startup depends on your ability to learn from the mistakes and to use the mistake as a springboard for making better decisions in the future.
3. Managing risks
Managing a trading portfolio requires a great deal of risk management. You never really know how the trade will turn despite your best efforts in conducting due diligence with fundamental and technical analysis. However, the smart application of strategies such as stop/limit loss orders, multiple trades, and reinvesting profits among other things could mitigate trading risks.
As a startup founder, you’ll be in charge of anticipating and managing risks for the startup. You’ll need to find ways to not put all of your eggs in one basket when looking for funding, incubation support, or hiring critical team members.
4. Knowing when to quit/give up
When traders find out that some of their trades are on a steep decline that could lead to trading losses; they’ll pause to take stock of the change in market dynamics and in most cases, they’ll axe the losing trade instead of waiting for the trade to turnaround for profits.
As a startup founder, sometimes your market research will not yield the results you expected. Perhaps your product is just too early/too late to the market, maybe the pricing is pushing buyers away, maybe people don’t just want the product.
You’ll need to know when to accept defeat, cut your losses, and move forward. Quitting/giving up on an idea doesn’t necessarily mean that you’ll stop being an entrepreneur, it just suggests that you’ll rethink your strategies and make changes where necessary.