Quote from Cache Landing:
Conventional business provides either a service or a product that is of value to the consumer.
Trading is a business in which you look to benefit by obtaining prices for positions in future/option contracts or shares of a company that allow you to offset those positions at a profit often enough that, combined with your risk management parameters, the end result over time is enough profit to make a living.
Both parties in a trade perceive value. The value can be based on fear or greed. You buy to initiate a position (acquire inventory at value price) because you believe price is going higher and want to profit from that by selling your inventory at a profit; you buy to offset a short position because you fear price is going higher and want to lock in a profit or prevent a loss from breaching your risk management parameters.
Most businesses that offer products or services must compete for customers by offering them value in terms of price or quality or both. Often the value they offer is nothing more than perceived value. There are companies that sell nearly identical products made in the same factories under different designs/brand names for very different prices. The fundamental value of the merchandise is identical, but the perceived value is very different. There are companies that take advantage of the fact customers have no choice or perceive a lack of choice in the transaction (such as "health" care). If you're in a car accident and need a brain scan, you can't call around and get the best price first.
The professional trader looks to position him/herself to offer value to other traders (customers). A trader can obtain inventory at what s/he perceives is a value price, and possibly sell it to someone else at a higher price because that someone else perceives value in buying at that price, for whatever reason.
The professional trader also looks to profit from situations in which customers feel as if they have no choice but to buy from or sell to other traders at the current market price (such as in a short squeeze or a panic-driven sell off).
Trading professionally (for a living) based on extensive market research (defining a statistical edge and rules for profiting from it) and test marketing (trading in a demo account or on paper) is indeed a business in which you position yourself to profit by providing perceived value to others.
Just as half of small businesses fail within 5 years, a large percentage of traders fail (I believe 95% is the oft-quoted stat). The reason the percentage of failed traders is so high is because the barriers to entry are about as low as it gets. Almost anyone with internet access and a few hundred dollars can start trading.
If you do your market research, develop a business plan, do ample test marketing, then start your business (trading) and follow your business plan, your chance of success should be far better than 5%.
