The Right Side of the Quadrant

Last week I talked about the left side of Robert Kiyosaki's Cash Flow Quadrant and it relation to systems. This week I want to cover the more successful traders who always think in terms of having money work for them.

The Business-Owner Trader Owns the Systems. Let's look at the person who takes the next step - they treat their trading business as a group of systems. They make these systems as automatic as possible, and then they train other people to run them. You cannot be a perfectionist and develop automatic systems. However, you can develop such systems and free yourself.

Let me give you two examples. Business-owner mentality traders that I have met are total systems traders. Everything is computerized. Data comes in, computers process the data, and orders are automatically sent for execution. These traders are constantly looking for ways to make everything automatic. If a task is repetitive, then they will computerize it to eliminate the need for a human being. The result is that the business owner trader can leave the business in the hands of someone else and do other things. They know the systems will work because they have developed them. The systems might not be perfect. They might not make huge returns, but they work consistently within the parameters for which they were designed. Furthermore, such business owner traders also have systems in place for getting new funds, dealing with clients, managing the back office, and doing research on ongoing systems. When an employee leaves, they can train someone else to run the system that was handled by that employee.

There are several steps to becoming a business-owner trader. The first step is to be able to develop/or purchase all of the necessary systems to run the business. As an example, the business owner would know that position sizing is a key portion of a trading business and would have a system to account for that. They would also have systems in place to manage their research, their data, their back office accounting, and other people who are involved.

Once their systems are in place, the business-owner trader must find employees to run the systems. This requires good leadership skills. A business person would own the system and hire good people to run it. Thus, the business ends up generating money for the trader without requiring the trader's time. The business and its employees work for the trader.

The Investor Trader Invests in Systems. Traders become investors when they invest in systems that give them a good return on their capital without requiring any additional work. For example, if you read Warren Buffet's criteria for investing in a business (contained in my book, Trade Your Way to Financial Freedom), you'll find that a key criterion for him is investing in businesses with good systems that produce a high rate of return on the owner's equity. Once such things are found, no additional work is required. The money just rolls in from the investment. The trader/investor has money working for him.

If you wish to increase your success as a trader, then I would suggest that you begin to move to the business owner and investor side of trading. When you do, money will work for you. You won't be working for money.