A convenient way to think about trading

A convenient way of thinking about trading

Most people believe that in order to be successful in business, you have to be profitable, and for the most part they’d be right.  The primary “goal” is quite easy to measure – are you profitable or are you not? If you talk to any salesperson or sit through any company sales pitch, however, you may hear a different depiction of what businesses are. Namely they are “problem solvers”.

Whichever way you characterize it, businesses exist to supply products or services for those that demand (either want or need) particular products and services. It is helpful to point this out because if you decide you want to trade, it is much more practical to think of trading as one would if they were opening/operating their own business.   If you were to think of stock trading as a business you might start to ask:  what type of business am I? Who are my customers?  Who are my competitors?  Who are my collaborators? What kind of market is there for my product/service?  If you are trading a stock, though, what “problem” are you solving?

One very useful way to think about trading stocks is by way of an analogy with a convenience store.    The convenience store is in the business of having everyday items available in a convenient location.  Customers usually pay a bit of a premium for the “convenience” of not having to go out of their way to get the desired item. As a stock trader or investor, you are a convenient source of an item (stocks) that may be in demand. You solve the problem of inconvenient access to a stock for a buyer or seller.

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