Trading and Starting a Biz-- The Similariites

C

Corso482

Is it just me, or are all entrepreneurs taking insanely stupid risks everytime they start a business?

Here's what I mean-- in trading, you're taught never to risk more than 2% of your total capital on any one trade. Well, don't most entrepreneurs risk 100+% of their total capital everytime they start a business? The usually risk all of their capital and then some borrowed money.

So, save venture capitalists and multi-millionaires who risk a small % on each business, are small entrepreneurs who risk it all taking stupid risks?

And if the 2% rule can be applied to starting businesses, are big fish, who can spread their entrepreneurial bets, the only ones who should be starting businesses?
 
there are some similarities that i have also notices: such as when starting a business, oftentimes you go in the hole for the first couple of years. this is similar to the "learning curve" that traders go through. you just have to look at it in the right frame of mind. when people tell me that going out on my own is a huge risk, i agree with them, but i also point out that starting any business is a huge risk....
 
Quote from Corso482:

Well, don't most entrepreneurs risk 100+% of their total capital everytime they start a business?
More...

it usually takes multiple months or years to loose it all in a business. could be much faster when a contract goes limit up/down ...
 
Small business and traders who follow your rules do the same thing.

Both put all their money into their efforts. By putting 98% on the sidelines as a way to be able to trade 2% in one trade a trader is investing 100% of his capital in one endeavor. Each additional 2% he pulls off the sideline for another trading opportunity, gradually takes more and more money into the marketplace. 50 separate independant trades is the limiting situation.

A guy going into a small business does the same with his total capital as shown in his business plan. whether services or products are for sale, he uses 100% of his capital in support of the flow of services/products. 50 separate independant concurrent trades equal 100% ap of cap in a small business.

It turns out that no one in ET is trading at capacitiy as we read their posts. This is because people here are serially and edge oriented and thus they can not apply capital to make it work very hard for them. Trading is a parallel type effort just as small business is a parallel effort. The 2% rule that you apply to your approaches probably makes it necessary to keep relatively huge amounts of capital on the sidelines because of the common ET limitation of not knowing what to do with each of the 50 parts of your total capital.
 
A biz usually has some high degree of linearity to it. The problem with trading is that traders are like athletes, no matter the performance yesterday we have to get up and start from scratch today.
 
Ahhhhhh...now I see.

Entrepreneurs while using 100+% of their capital, can limit their risk to 2% per trade by doing the follwoing:

Let's say I sell used cars. Every car I buy is like one trade. I can either sell it at a profit or eventually sell it at a loss. Holding it will eventually result in one of those two.

So as long as only 2% goes into each car, then I'm following that rule. The edge could be only buying cars for less than I 'know' I can sell them for.

In order to make a profit, I use the same positive expectancy formula that's used in trading.

Employees, rent, etc, are like commissions, internet services, etc.
 
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