What type of Trader are you? Growth vs Income

So the next chapter in my occasional series about ‘What type of Trader are you?’ focuses on whether you are trading for Growth or Income.

Most  standard Investment strategies offer you the route of either looking for Capital Growth on your investment or a stream of Income.  It doesn’t matter whether you’re investing in Mutual Funds, Properties or Businesses etc. 

You can either look to have a monthly or annual income from your investment, say directly investing in or starting a business that pays you a dividend or bonus for your investment. Or perhaps owning a rental property that pays you an income.

Or you can forsake that income in the hope of extensive Capital Growth of your investment. So for example owning a piece of artwork, some fine wine, investing in a high growth tech stock (or flipping a property if you’re an MP looking for some quick hard cash).

When it comes to your trading account remember that it should be viewed as an investment, you’ve probably had to work hard to create the seed capital for your business (treating trading as a business will be a future topic).  Be honest with yourself, when you look at the account is it for Growth or Income?

 I suspect that whilst most individuals goals centre around Income ‘I want to earn £10,000 per calendar month from trading’ etc the reality is that they’re actually trading for Growth. 

Most folks (certainly in the Retail Private sector) are under-capitalised and would need to grow their account to a level whereby they could take significant profit for themselves. There’s nothing wrong with this, I just ask you to be honest and review your overall Business Strategy to ensure alignment of goals and objectives.

Alternatively if you are trading for income then don’t forget to pay yourself on a regular basis!  I have a belief that there is a psychological element to paying yourself from Trading. It is good for you and sends the right message to your brain that you’re making progress.  It’s not necessarily the monetary amount, it’s just the process of treating it as a business and sending yourself the right messages.

Now there maybe some of you reading this and thinking ‘Well I don’t make enough profits to take money as an income’.  Congratulations! You’ve answered the question.  You are trading for growth.  Are your Business plan, goals and strategies aligned with that?

I hope this helps and as always -Trade Well!

FXTrader Paul

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About FXTraderPaul

A professional Trader and Coach, FXTraderPaul blogs about his adventures from the front-lines of FX Trading. A Trader and educator who can walk the walk as opposed to merely talk the talk!

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2 Comments on “What type of Trader are you? Growth vs Income”

  1. gillej Says:

    Paul,
    Nice post.
    Bit of a conundrum…..you see the bigger the account the bigger your trade size and thus the biger the account becomes, this is exponential of course.

    My target is to have 50% of the monthly profit as income and 50% back into the account. That said after my first 2 weeks I am not showing any profit 😦 So neither account is flourishing.

    Couldn’t find any opportunities today other than USDCAD; but having to scour quite hard. Tomorrow being NFP is a time to take a backseat, catch up with Mark Douglas and some needed admin.

    I might setup a blog to share my experiences (good, bad and terribe) too, seems WordPress is easy to use.

    James

    Like

    Reply

    • FXTraderPaul Says:

      Hi James,

      Thanks for your comments and feedback.

      It’s been quite a strange / dull week. There’s been a host of announcments out with the NFP figures set to finish off the week. When there’s such a barrage of news the markets can be volatile and liable to whip-saw. Best to stay on the sidelines, read a book, have a cup of tea and wait for the madness to recede.

      Remember being flat is a position.

      Paul

      Like

      Reply

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