What is better Profitability and stability in trading process

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Contents

What is better ? Profitability and stability in trading process

Online trading attracts a significant amount of users first and foremost because it is a great opportunity to earn a large profit. Yes, of course, you can earn a sizable profit from one contract and in principle, it is not hard. However, that’s just lucky, it’s like winning the lottery. Hence, many experts say that profitability alone isn’t a goal market participants should strive for. Your end goal for trading should be stability, a stability that will lead to the dynamic growth of your capital. On this note, it is widely debated which is better in trading, short-term profit and overnight success or stable trading that produces results. Let’s examine this question together. This will without a doubt be useful for every online investor without exception.

So, let’s begin our analysis of the advantages and disadvantages of both profitability and stability in trading. Of course, it isn’t right to separate these concepts, as in both cases we are talking about getting results. Therefore, to clarify the concept, when we say profitability, we mean earning a large financial profit from a contract with an increased level of risk, decided on the basis of the trading parameters of individual investors based on their statistics. And, of course, in terms of stability, we mean generating a specific amount of profit in the medium-term to long-term perspective. As you can see, the end result is profit either way, although the benefit comes from how it is generated.

The following situation can be taken as a practical example of stable and profitable trading. More than likely, every trader online has encountered the success stories where an average online investor, overnight or in a day, earns a hundred or even a thousand percent or a six-figure profit from a single contract! There are other stories as well where, for example, professional investors trade profitably for 100 days, meaning that they generated a minimal, although maintained positive result over a long period of time. What do you think, who is the more successful trader on the market? Of course, beginners would say that it is better to make millions right away than toll away on the market for ages. However, experts say that it is better to generate profit stability! Here lies the difference between professional and successful traders from inexperienced market participants.

The problem is that, when articles are published, no one ever goes into the overall statistics of these lucky individuals. Of course, large capital growth definitely happens in trading, especially when working on highly volatile markets or during major collapses and rate spikes. For example, in 2008, at the beginning of the international crisis, an entire portfolio of international currencies collapsed. If you looked into the history of the market, you would see how within the span of a week the GBP/USD lost more than half of its worth. When heavy leverage is used and significant investments are made in a single contract, it is possible to earn an impressive amount of money, as a number of traders have done. The history of stock market collapse repeated itself in 2020 and 2020. In this period, even beginners can generate significant capital! That being said, as you can see, there are large lapses of time between highly-lucrative trading periods that aren’t profitable in such a way. Unlike these “lucky” individuals, experts strive for stability and profit all the time they work on exchange platforms! And on that note, it is important to mention that, while their stories are portrayed in the best possible light, the vast majority of traders who produce such impressive result eventually lose every penny of it. The reason for this lies in their less than professional approach to trading and the psychological problems that arise with earning a large amount of capital. A bit further into the psychological aspect, the issue is that achieving success gives you confidence. This is a very negative factor in terms of trading on the market. When an investor is so confident in their exceptional nature, they make mistakes, often involving risk and capital management, as well as effectively conducting technical analysis. As a result, large amounts of capital quickly dissolve.

In general, it isn’t great to brag about significant results among traders, as it is well known that money is drawn to calm. A more attractive and professional goal is to demonstrate stable trading results. We’d go as far as saying that you can tell a lot about an active trader from their investment chart. Gradual capital growth that moved up stably without any large losses or spikes up looks more attractive than a chart with high peaks and subsequent critical losses.

If you are new to trading, we recommend striving for stability, rather than short-term success. It is better if you increase your capital stably over an extended period of time, let’s say $200, improving your professional skills and the quality of your trading than to accidentally earn a lump sum of profit. In this way, you are investing in your future and you can calculate more accurate trading signals.

When considering the benefits of stably generating income, it is important to note the drawbacks. In this case, there is only one point of contention, the increase in capital isn’t dynamic. Of course, earning minimal profit growth isn’t all that interesting to any investor, although when you take stability into account, as well as overall statistics from a long-term perspective, it isn’t all that much of a drawback.

The conclusion thus far is that, without a doubt, you prove your level of professionalism as well as the quality of your work on the market when you generate profit stably, rather than achieving success overnight. Yes, when you achieve astonishing success short-term it is great, however, when your focus is on the long term, you can earn even more! Once this is clear to you, we have the following recommendations for you to help you generate a stable profit:

● You never stop learning throughout your career, you will generate a reliable profit on the market if you gradually polish your trading skills and expand your experience. Trading is a complex process, both in technical terms, as well as intellectually. You can never fully master all the nuances of working with financial assets. Therefore, if you want to consider yourself a professional, you need to continuously strive for self-improvement.

●Use a multitude of analytical approaches and strategies when you trade. The issue is that, on the market, price fluctuation is both unstable and volatile. Occasionally it is possible to forecast the relatively chaotic movements involving sharp volatile rate reversals. Therefore, there is no way whatsoever to generate signals stably in a long-term perspective only relying on one strategy. There is no one system that fully takes into account all of the possible situations you can find on the market, meaning that having a restricted selection of trading systems negatively affects your trading stability. Here, it is recommended that you develop an entire arsenal of analytical approaches for yourself, which should include systems based on both technical and fundamental approaches such as, trading based on trends, chart levels and market figures, candle pattern systems and price level strategies, wave patterns and utilizing indicator services, and trading the news, the leading fundamental approach to analysis. You should have a quality selection of trading at your disposal that accounts for all situations and market variance. This way, you can not only generate stable trading results but also improve upon your professional skills and expand your experience

● Set realistic goals for yourself, the first mistake trader make is setting unattainable trading goals. Many traders dream of earning a million trading in a month, but that is completely unrealistic. It also creates a myriad of problems for investors, first and foremost psychologically, disrupting their emotional state and decreasing stability when trading.

● Set yourself realistic goals and methodically work to achieve them. For example, identify the minimal capital growth you expect from yourself in a day, ideally up to $200. Trade using an effective system with which you can reliably achieve this trading indicator. Other than that, be disciplined about clearly setting your trading tasks for the day, giving you the opportunity to manage your capital.

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● Don’t take risks, unwarranted trading risks are the enemy of trading stably. With a larger contract, you risk even more significant losses that have the potential to completely change your trading indicator and cause you to lose your entire capital. Therefore, to achieve overall stability trading and meet your daily trading goals, we recommend that you adhere to the basic rules of money management. Professional traders advise investing no more than 5% of your total operating capital on anyone trading position on the financial market. Following this, you can only generate profit stably, however, at the same time you are setting up the safest trading conditions for you and your capital.

● Celebrate your progress, trading is a very interesting process and not only because you have the opportunity to earn real money. Trading is a daily intellectual and psychological challenge. That being said, if you ate stably achieving your set goals, you need to celebrate that fact. You are now included in the 10% of successful traders who are capable of generating a stable profit on the market. It isn’t a secret that 90% of all traders lose capital, and you are earning stably. Use it to motivate yourself to work towards further professional growth.

● Don’t ever compare yourself to other investors. When working on the market, you can encounter various approaches to successful trading, including generating multi-million-dollar profits in the space of a day, as well as achieving 100% capital growth. As a result, you might be tempted to follow the approach of such “lucky” individuals. However, it isn’t worth it, as such a path leads to a multitude of mistakes and large financial problems that can destroy your trading capital. Note your doubts when you evaluate your own strengths and abilities, follow your plan and strategy, and work out your own trading philosophy. This is the only way to create the conditions for stably generating profit on the market.

● Take a break when you receive unexpected results. When you trade with financial assets, despite traders’ best efforts to generate stable results, there are times when investors end up with trading anomalies. It could be a large amount of profit, or a significant loss, both situations are anomalies. If you succumb to the situation, take a break from the market. It is vital for the stability of your mental health as an investor. Some experts take extended breaks in such circumstances until they feel certain that they won’t succumb to gambling on the market or be distraught when trading.

● Listen to your emotions. Psychology is possibly the most important aspect of trading and it holds significant influence over the trading process. Therefore, in order to trade stably on the market, you need to pay close attention to your emotions and mental state. You need to evaluate your accurately emotions and mood in order to achieve your set trading goals. Therefore, you achieve a high degree of awareness when you make trading decisions and increase the quality of your market analysis and, accordingly, you more effectively achieve vital indicators.

As you can see, professionalism and trading stably go hand in hand. Traders can only achieve success on the market through hard work and continuously improving their professional skills.

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43 Ways To Improve Profitability of Your Company

It is surprising to know how many business owners don’t know the difference between profit and revenue. They believe that just because money is coming into their business, they are actually making it. Money coming into your business is not yours until expenses have been paid. Once these expenses are paid, the remaining is the profit. Many businesses break even or are in debt after their expenses are accounted for. There are business owners who do not even know this is occurring, they just pay out money and go about their business.

Knowing the ways to improve profitability of your business is very important to succeed. You have probably heard about businesses who have a huge customer base, but they have to shut down due to financial reasons. This is because they do not have a strategic plan that outlines how their business will achieve profitability. Then when their business is unable to handle their basic business operations or expand their operations, they are surprised as to why they have financial issues.

You do not want to be one of those businesses that cannot earn a profit due to poor planning. It is best to learn the tactics that can be used to develop a business that is very profitable. Provided are 43 tactics that will help your business become profitable. Read them and learn how your business can develop a strategy that leads to profitability.

1) Prepare a strategic plan with 1-year, 3-year, and 5-year goals

Business takes time to develop, therefore, you need to create a strategy that has a five-year outlook at the minimum. Each year needs to define how your business will grow over the years. As your business grows over the years, it will become more complex, which means your financial plan needs to grow with your business. This means your strategy needs to not only define how you will make money but also how you profit the majority of the money you generate. Constantly review your strategic plan so that you are aware if the results you produce match your set goals.

2) Determine up to five key success factors for your business

Your business will need to operate under five principles that will determine its success. Once these principles are determined, you will need to monitor these factors weekly to ensure that your actions align with them. These key factors should focus on growth and prosperity. Sales and expense controls should definitely be two factors that are also within your success factors. Without these two factors, you will find it hard for your business to be profitable.

3) Implement and monitor a budget

A budget is what helps to keep your expenses in control. Your budget needs to be followed closely in order to ensure that your finances remain in order. Follow your budget strictly and only go outside of it when it is beneficial to your business generating more money or keeping more money. Your budget also needs to be revisited quarterly, if not monthly. This will help your budget remain aligned with the growth of your business.

4) Each year, abandon up to 10 percent of your business that is not aligned with your strategic plan

A profitable business is one that gets rid of deadweight. You will need to analyze which parts of your business are the least profitable and do away with them because they take up both time and money. It is better to focus on those business activities that bring in money, which justifies your decision to maintain their existence.

5) Seek input from outside your organization

Consultants are professionals who can help you see things in your business that you are too blinded to see. When you are within your business, it is hard to separate your vision for your business from its actual reality. Therefore, outside advice can help you discover your business’s weaknesses, and how to improve these shortcomings. Do background research before hiring a consultant. You want to be sure you hire someone who can deliver on their guarantees and for their high fees.

6) Create an “exit” strategy now

Even if you are building a generational business, you still need to determine how ownership will be handed over to members of your family. An exit strategy makes the sale of your business or transition of your business an easy initiative to accomplish. This takes out the stress of the process, so you are not scrambling to make it happen when you are ready to exit from your business.

7) Benchmark revenue and overhead percentages to the leaders in your industry

Leaders in your industry provide you with a blueprint of how your business needs to operate. Take their strategies and turn them into your own so that you can build your business to be among the industry leaders. Once you know how to make more money, then you will put your business in the position to be successful.

8) Establish an advisory board of key clients

Your best clients are the ones who will want to see your business grow and be successful. Allow these clients to point out where the strengths and weaknesses lie within your business. This will help you understand how to improve your business from your client’s point of view, which allows you to develop a product or service that will be in great demand from your target market.

9) Think of every product or service that your company sells as if it were a separate business. Does each one contribute to profitability?

Every product and service you have is certainly not producing a profit. When this occurs, you will need to get rid of these products and services and keep those which generate money. This will help you eliminate costs in favor of profitability. You will see your profits increase significantly once you eliminate these weak performing products and services.

10) Develop a cost accounting system to determine exactly what it costs you to deliver a service or product

You need to know if the product or service you are offering cost you more money than the money it is generating. If this is the case, you will need to sell more of them or raise the prices. If neither can be achieved, you will have to remove them from your product and service offerings.

11) Conduct a client/customer satisfaction survey every year

Get honest feedback from your clients. Asks them what they liked about your business and what they disliked. This will help you improve your business each year so that you can keep long-term clients, instead of having to constantly find new clients every year.

12) Revitalize aging products and services. What other uses can you find for your products or services?

Just because your products and services are not as popular as they once were, it does not necessarily mean that you have to get rid of them immediately. See if you can find ways to repurpose their old uses in order to attract new markets before disposing of them. If you are able to repurpose their use, you now have a new stream of income from a product or service that was once dormant.

13) Listen to your employee’s complaints about tedious tasks

Your employee complaints are an opportunity for you to take a look at their workload to see if they are focusing on the task that can help your business to grow or just busy work. If it is the latter, you can outsource this work to other companies, so that your employees are strictly focused on making money and maintaining the operations of your business.

14) Give your customers what they want

When you give your customers exactly what they want, pricing is not an issue for them. When the value is being delivered, that outweighs price, because the value is helping them produce better results than they were previously experiencing. Also, when you give customers exactly what they want, they become your biggest business advocates.

15) Include a guarantee on your invoices

A guarantee should be included to determine if the customer found the value of your product or service to be worth its cost. This gives your customer the opportunity to reply honestly, which allows you to look closely at your products and services to determine their true worth.

16) Enter into joint ventures or strategic alliances with your suppliers or customers to market each other’s products

Strategic alliances are the perfect opportunities to expose your business to new markets. It definitely makes sense to partner with those whose businesses complement your own business. Cross promotion will work very well in such cases because the products and services match up so well.

17) Engage a CPA firm that has national and international resources and represents other businesses similar to yours

A CPA who works on an international or even national level has the experience to handle all types of different financial situations. You want to work with firms that have these vast experiences so that no financial situation is too challenging for them to service.

18) Test price increases to selected markets or along product lines

Deliberately increase your prices to see how your customers react. If no changes in demand occurs, slowly increase the prices until demand levels off. Along with demand, the cash you generate declines, then set your prices back. If demand falls, but your cash generation increases, stay at the new price to keep your new profitability.

19) Sell off idle assets

Assets that are not actively being used, sitting around costing money, rather than generating money need to be sold for cash. It makes no sense to hold on to assets that have become expenses. You can use the cash made to reinvest into your business to increase its profitability.

20) Reduce inventory to the smallest amount possible while still meeting customer demands

Inventory that is sitting around for months and not being sold is costing you maintenance fees. If you are not a big chain store, only keep enough inventory on hand to meet your customer’s demands, and reorder inventory when you are nearing redline levels of available product.

21) Get vendors to place inventory in your store on consignment

Develop the relationships with your vendors that allow you to receive product and pay them once that product is sold. This helps you keep cash on hand for emergencies, while also being able to meet customer’s demands.

22) Receive your bank statements unopened and review the checks

You will want to review your bank statements in order to determine your spending habits, and see where you can improve. If you are spending more money than you are bring in, this is a habit that quickly needs to be reversed. Little expenses that happen throughout the day quickly add up to be big expenses over time.

23) If you feel your bank loan is choking your business, ask the bank to restructure your loan

Your bank loan can be a burden that does more harm than good after it is received. If your loan repayment is eating away at your profits, ask your bank if you can get new terms that allow your business to actually make money.

24) Secure competitive bids for all major expenditures

When you are paying big money for a particular service, you will want to be sure that you are receiving the best price. Let your potential vendors know you are comparing prices, and would like to determine who provides the best value for their prices. This will help you find the best vendor before being locked into a contract that you have to wait years to get out of.

25) Attack the collection of accounts receivable beginning with the most current first

Start contacting your customers to determine when they will be paying their invoices. Communicate the length of time they have to make these payments, and get them to agree to a time when this payment will be made. Do not let them go until they agree to make their payment by a scheduled date.

26) Never let the excitement of receiving a new customer overshadow the need to obtain solid credit information

Just because you have a new customer, it does not mean that they are a good customer. You need to determine their creditworthiness so that you do not end up dealing with a customer who has issues making payments for the services rendered.

27) Develop a daily cash report for key executives and salespersons who need to follow up with accounts receivable

Your key people need to be involved in ensuring that payments are received for products and services sold. You do not have time to handle these things yourself as a business owner, so you need your key people to take responsibility for these tasks.

28) Reduce labor costs with part-time workers

Part-time workers cost less to employ than full-time workers. Take advantage of this luxury by hiring multiple part-time workers. Be warned that these people will be the first to leave your company if they are presented with a full-time opportunity.

29) Shop for insurance often

Insurance is expensive to maintain, so you want to be sure you are dealing with insurers who are providing you with the best options. If you feel like you are paying too much for the service you are receiving, do not hesitate to switch providers.

30) Instill a sense of urgency throughout your business

You can not allow a business atmosphere of complacency. This leads to a business that operates poorly and get overtaken by its competitors. You should promote excellence throughout your business, from the front desk to the key executives.

31) Make sure your team knows what is expected

When you do not implement a set of expectations, your team has no guidelines to follow. You need to let it be known how many sales calls need to be made daily. Communicate the sales quotas for the week, month, and quarter. Train them how to effectively communicate with prospects and existing customers.

32) Step out of your office to learn what is going on

Go out and talk to your target market, Find out what they would like from their service providers. View your employees in action. Do you see anywhere they can improve? Look at the entire operations of your business live so that you can understand why your business is succeeding or failing.

33) Identify the key positions within your company that have contact with customers

The employees who have contact with your customers have a very important role. They can either help you retain customers by providing great customer service, or lose customers by providing terrible customer service. You want to train people in these positions to be a personable and patient as possible.

34) Spend extra time and money on training so employees are prepared to do the tasks assigned to them

Training may seem expensive at first, but in the long run, it helps you operate a business that performs well and provides great customer service. Your employees will understand what is expected of them and you will generate more money in return due to their great work.

35) Relate compensation to productivity for everyone in your company

It should be known that people get paid for the results they produce. This will cause your employees to work harder, increasing the work-ethic within your organization.

36) Develop and annually update a personal guide to provide a consistent application of rules and conduct

When you consistently let your employees know what is expected of them, this helps to eliminate any excuses that can be said for not knowing the rules of conduct. This will point out bad employees who are a threat to disrupting your business’s work environment.

37) Develop a CEO monthly letter to employees to build teamwork and communication

You want to communicate with your team monthly, letting them know about any updates, highlighting individual performances, and reminding them of goals for the quarter and year. This will help build team morale and set a focus on expectations.

38) Departmentalize your company budget and hold your managers accountable for the variances

Give each department budget so that you can determine which managers produce the best results with their given budget. Reward those who take their budget and generate a profit, and work with those who produce bad results. You want all of your managers to operate on the same level of excellence.

39) Emphasize communication skills

It is important that everyone on your team knows how to communicate with not only each other but especially with customers. Bad communication can be the cause of problems arising due to people not being able to listen to one another, or being able to properly articulate their thoughts.

40) Invest in your people

Your team will only be able to grow and provide exceptional work when you invest in their improvement. Invest in their continued education and also provide them with the best resources to effectively do their job.

41) Employee evaluations are essential for communicating progress

Have time set aside for quarterly or yearly reviews you want to be sure that your employees are well aware of their strengths and weaknesses so that they can work on improving their performance

42) Make a point of rewarding outstanding performance in the presence of that person’s peers

When you publicly reward your employees, it helps to improve employee moral. People will know that their hard work does not go unnoticed, and they will be recognized for going over and beyond expectations.

43) Send personal notes of congratulations or thanks to employees at their homes

When you send notes of appreciation to employees homes, it shows that you think of them as a person rather than just a worker. This helps to increase employee loyalty to your company.

If you want to operate a profitable business, take these tips and implement them into your own business. They will help your business perform better, continue to grow, and increase the profits earned.

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The Difference Between Profitability and Profit

Although the two terms are used interchangeably, profit and profitability are not the same. Both are accounting metrics in analyzing the financial success of a company, but there are distinct differences between the two. To adequately determine whether a company is financially sound or poised for growth, investors must first understand what differentiates a company’s profit from its profitability.

Definition of Profit

Profit is an absolute number determined by the amount of income or revenue above and beyond the costs or expenses a company incurs. It is calculated as total revenue minus total expenses and appears on a company’s income statement. No matter the size or scope of the business or the industry in which it operates, a company’s objective is always to make a profit.

Definition of Profitability

Profitability is closely related to profit – but with one key difference. While profit is an absolute amount, profitability is a relative one. It is the metric used to determine the scope of a company’s profit in relation to the size of the business. Profitability is a measurement of efficiency – and ultimately its success or failure. A further definition of profitability is a business’s ability to produce a return on an investment based on its resources in comparison with an alternative investment. Although a company can realize a profit, this does not necessarily mean that the company is profitable.

Profitability Index

Real-Life Applications

To determine the worth of an investment in a company, investors cannot rely on a profit calculation alone. Instead, an analysis of a company’s profitability is necessary to understand if the company is efficiently utilizing its resources and its capital.

If a company is deemed to have a profit but is unprofitable, there are tools for increasing profitability and overall company growth. Failing projects can quickly bog down a company, which directly leads to sunk costs. Companies can explore a profitability index to determine whether a project is worth pursuing to reduce the occurrence of project failures. This metric provides company management with insight into the costs versus the benefits of a project, and it is calculated by dividing the present value of future cash flows by a project’s initial investment.

A company can also increase profitability through the theory of marginal returns. One of the first steps a company takes to increase profitability is to boost sales, which requires an increase in production. Marginal return, also known as marginal product, is a theory that states that the addition of workers up to a certain point increases the use of capital in an efficient way; exceeding that number of workers leads to diminishing returns and ultimately less profitability. To be profitable, it is necessary for a company to apply this theory to its specific business and production needs to experience growth in an efficient, cost-effective manner.

The Bottom Line

Although they sound similar, profit and profitability are handled almost exclusively when it comes to investing and business management. Rearranging of product lines and increasing prices are two theories that hold the most sway over whether a company has a profit or can experience future profitability.

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