In the current economic scenario, trading is a lucrative business opportunity. Are you too looking to be a full-time investor? It is a good idea to set up a trading entity of your own, separate from your personal investments. It would allow you to better manage both, and as a full-time investor, you would be eligible for certain tax benefits.
What is a trading business?
Trading is the act of buying and selling financial instruments, such as stocks, bonds, commodities, and currencies, with the aim of making a profit. Trading can be done on different time frames, from minutes to months, depending on the trader’s strategy and goals.
How to start trading business in India?
The main goal of a trading business is to make money. When you treat it merely as a hobby or side project, often, you are quite unsuccessful in doing so. Before taking up trading full time, there are certain measures or steps you should take.
Read on to know what those are.
1. Educate yourself
Making an investment to learn all the nuances of trading, before getting into it, is necessary for success.
Although no special degrees or educational qualifications are required to start trading, it is necessary to educate yourself. You should know how to read the market and all the methods of analysis used to predict where it will go in the future.
It is also important that you have a specific method, that you know thoroughly, before you enter the market and any money is risked.
2. Have a business plan
Your business plan is the method that you create to become a successful trader. It involves deciding which type of trading you want to do (day or swing), creating a system to manage risks, deciding the software you will use, and the setups you wish to focus on. Your research on all these aspects during the ‘educating yourself’ phase will help you create this comprehensive plan. You can use a trading stimulation software, or start trading with a small capital to test this plan out.
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3. Hire brokers and get extra tools
Depending on whether you are going into swing or day trading, the cost you pay your brokers will vary. Since day trading involves continuous trading throughout the day, the commission for day trading brokers is typically higher. You can get a business loan to help offset this cost. With swing trading, you only need to pay for the stocks that are traded, making this type of trading a bit more affordable.
Moreover, you may need extra tools to supplement those offered by a broker, for example, additional charting or scanning capabilities. Additionally, you will need to get advice from a licensed tax expert on the tax benefits you will get when you set up a trading company.
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4. Set up your trading entity
Once you have done this much, it is time to set up your own trading entity. One method of doing this is by setting up a limited liability partnership (LLP), so that you can separate your trading from your personal investments. You can also simply set up a separate trading account with an international bank to get started.
It is important, here, to note that no business plan will give you a 100% success rate. You are bound to make mistakes, and you must be flexible. It is important that you learn from them, with your highest priority being managing the risks. It takes a great deal of passion and energy to run a successful trading business. There will always be times when you lose trades, no matter how great a trader you are. But with a good business plan and the right source of business finance, your trading business will grow steadily to become a successful venture.
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