Traders have the blueprint to be great entrepreneurs

The nature of a trader’s job has changed significantly since the global financial crisis, partly due to technology-driven disruption. The banks’ ability to take risks has diminished, clients are more interested in simpler structures and margins are on a decline.

The emergence of new technologies such as cloud computing, robotic process automation and artificial intelligence has levelled the playing field, allowing smaller fintech companies to compete on equal footing with banking giants. Client and regulator confidence have moved toward new entrants as well.

With these shakeups, some traders now look at opportunities on the other side of the fence: entrepreneurship. The idea of switching career paths prove interesting, as trading and founding a startup share many similar aspects, albeit with slight differences.

On risks and returns

Risk and returns are two such examples.

Both traders and entrepreneurs take risks and make their fair share of wrong decisions all the time. Uncertainty and making quick decisions with incomplete information are part and parcel of both professions. But, there is nothing to fear about making wrong decisions, as long as one learns and adapts from them. Good traders make money not because of making correct calls, but because of learning and adapting from mistakes – cutting losses or changing positions.

The big difference between the two professions is in risk management. Traders always monitor risk and are cautious of it, be it through sizing trades, hedging bets, or diversification. Entrepreneurs, meanwhile, go all in and have no such alternative.

In trading, gratification is immediate. Prices go up or down and it is apparent how much money is made or lost in any given deal. Traders always have the option of closing positions and leaving anytime. There are many chances to stop, learn and return.

With entrepreneurship, that is not quite the case. Entrepreneurs are in it for the long haul. There is no walking away from the business even, and especially, during tough times. Entrepreneurs find drive not in the outcome, returns, or payoff, but in the passion to prove themselves right and succeed. 

The social aspect

There is also a difference in how society perceives both professions. For instance, being a trader in Hong Kong is considered a more desirable profession than founding a startup.

In a recent KPMG survey, only 46% of entrepreneurs polled agreed that entrepreneurship is a well-respected career path in Hong Kong. Additionally, only 21% of entrepreneurs and 16% of students surveyed agree that parents in Hong Kong are happy to encourage their children to start a company.

But, startup founders don’t really look at others for validation upon embarking on an entrepreneurial journey. Entrepreneurs have an irrational confidence that take them forward, regardless of how people doubt their ideas or contradict their views. Where successful traders are quick to recognise what is happening and follow the trend, entrepreneurs carve their own path instead.

Lessons learned

Traders can learn a thing or two from entrepreneurs. For instance, a leader’s ability to carry people becomes increasingly important for the growth of startups. Entrepreneurs represent their business and vice versa. The ambition, positivity and conduct of an entrepreneur determine how others perceive the company.

In business, there are a lot of moving parts and it’s impossible for anyone to achieve anything on their own, making networking equally important. Entrepreneurs need others for advice, strategic partnerships and even companionship during tough times. Help can come from anyone, from unexpected sources and in unexpected ways.

The paths of trading and entrepreneurship intersect at many points and traders have the blueprint to make the switch. It may come as a pleasant surprise at how enlightening and satisfying that experience can be, with the many new, exciting things to try, lessons to learn and opportunities for growth to seize along the way.

Vivek Mohindra is co-founder and responsible officer of online asset management platform Kristal.AI.