Trading as a Business: Plans, Metrics, Reviews and Capital
Module 15
Lessons in this module
- 1Trading plan9 min
A trading plan is a written, dated document that fixes what you trade, when, how much you risk and when you stop, before any trade is open. It turns your rules, checklist and journal into one set of limits that every trade can be checked against.
- 2Performance metrics12 min
Drawdown is the fall in your account from a peak to the next low, measured in money and as a percentage of that peak. Win rate, expectancy and profit factor describe how often, how much and how efficiently trades pay, and read together, over enough trades, they describe a record far better than any one alone.
- 3Trade review cycle9 min
To review your trades, check each one against your written rules before you look at profit or loss, once a week, and then use a monthly review to ask whether your plan and your numbers still agree. The weekly review is for behaviour and ends in one change, and the monthly review is for the plan.
- 4Trading capital management10 min
Money management in forex is the set of written rules that decide how much of your account you risk, when you stop trading and which money you never add. It protects the capital you trade with, so the account stays at a workable size through losing runs.
About this module
Treating trading as a business means running it from written rules and records: a plan, numbers that measure how your method performs, a fixed review schedule, and limits that protect your trading capital. A business-like process gives you decisions you can check afterwards and capital that stays at a workable size through losing runs.
In this module you assemble a complete trading plan from the parts you wrote in earlier modules. You learn the performance metrics that describe a record of trades, including win rate, expectancy, profit factor and drawdown, and why a small sample says little. You set up a weekly and monthly review cycle that turns your journal into decisions. And you plan how to manage trading capital over years, including what you risk, when you stop and what you never add.
It builds directly on position sizing and the pre-trade risk checklist from Module 5, on writing your trading rules from Module 10, and on the trading journal from Module 11.
How do you treat trading as a business?
Treat trading as a business by writing a plan, tracking every trade, measuring results with the same numbers each month, and setting a fixed budget for risk, data and tools, like any small business. Decisions then rest on records, not on the last trade.
| A business has | The trading equivalent | Lesson |
|---|---|---|
| A business plan | A written trading plan: markets, setups, risk, schedule | Trading plan |
| Accounts | A trade journal with every entry, exit and cost | Trading journal |
| Monthly reports | Performance metrics reviewed on a fixed schedule | Trade review cycle |
| A capital budget | Risk limits that protect the account through losing runs | Trading capital management |
What does a trading business need to measure?
A trading business measures five numbers: net profit or loss, win rate, average win against average loss, expectancy per trade and maximum drawdown, all over enough trades to mean something. Costs such as spread, commission and swap belong in every figure, so the numbers match the statement.
A worked example over 50 trades: 20 wins averaging $60 and 30 losses averaging $30. Net result $1,200 minus $900, so $300. Win rate 40%. Expectancy $300 divided by 50 trades, or $6 a trade (0.40 × $60 − 0.60 × $30). Profit factor $1,200 / $900, about 1.33. The trading performance metrics lesson adds drawdown and explains why a small sample says little.
How much capital do you need to trade as a business?
The capital you need depends on the risk per trade your method requires and the minimum position size: at 1% risk, an account must be at least 100 times what a single stopped-out trade costs at the smallest size. Size from risk, never from an income target.
At 0.01 lot of EURUSD a pip is worth about $0.10, so a 50-pip stop costs $5 and needs at least $500 at 1% risk. The trading capital management lesson covers what to risk, when to stop and what never to add, and the forex compounding calculator shows how a steady return builds over time.
What do traders ask about trading as a business?
Traders ask four things first: whether trading can be a full-time business, what costs a trading business has, how often to review results and when to withdraw profits. The answers below each stand alone, with links to the lessons that cover them.
Can trading be a full-time business?
It can, once a tested method has a long record behind it. A common route is to trade part-time while the record builds, so the account never has to pay the bills during a drawdown and position size stays set by the plan.
What costs does a trading business have?
Trading costs (spread, commission and swap), tools such as a VPS or data, and tax, which depends on where you live. The trading cost calculator shows what each trade costs before you place it.
How often should you review your trading?
Weekly for process, whether you followed your rules, and monthly for results, the metrics above. The trade review cycle lesson gives both checklists.
When should you withdraw profits from a trading account?
On a fixed schedule and only from profit above a set capital level, such as a share of each month's gain. Withdrawing on a schedule keeps the account at the size your risk rules expect.
Practise what you learned
Open an account to use MetaTrader 5. Start on a demo account before risking real money.
Open Account