10 Steps to Creating a Great Trading Strategy
Trading Strategy: I’ve had the privilege of assisting over 60 Vistage members in developing their best business strategies.I worked with a management team member considering the company’s growth strategy a few years ago. The majority of the sales team believed that the system should focus on expanding into new geographic markets based solely on gut instinct.
After developing a financial model with the CFO, we determined that the company would be far better off investing in its existing markets, albeit with a slightly different offering and message. In this case, strategic thinking, market research, and depth won out over simplicity.
Our desire for simplicity should not trump our need for thoroughness, especially when a company’s future is at stake. Many businesses make hasty and reckless decisions that hurt their value because they lack research and planning.
Many CEOs have fallen in love with easy-to-use strategy templates that produce a quick and effective business strategy in a world where CEOs are overly caffeinated, stressed, and hungry for time. On the other hand, downloading a template promotes myopic thinking and poorly executed strategies. The result frequently resembles a short-term operating plan rather than a proper system.
Vistage members are becoming increasingly focus on execution, as they should. Hiring the wrong people or carrying out a plan based on incorrect assumptions can be costly.
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How to Anlyse Trading Strategy
Strategic planning, and even visioning, cannot accomplish in hours. Strategic planning is frequently associat with carrying out SWOT analysis. Participants attend an all-day meeting and leave with a list of opportunities that includes vague strategies like “international expansion.” Market analysis, research, and business intelligence are all missing from their list. When their ill-conceived tactics fail, they point the finger at strategy. It doesn’t have to be this way, as you’ll see if you keep reading:
Few steps you can take to create the best trading strategies and execute them with precision
Develop A True Vision.
Classically, a vision declaration is a snapshot of the future. It should include aspirations for what kind of company you want to be and, unlike a mission statement, articulate what success looks like in clear terms (customers, markets, volume, etc.).
Define Competitive Advantage.
The essence of strategy is to identify how a company can offer unique value to its customers. In many sectors of the economy, companies trape in a sea of equality. A well-thought-out business strategy must consider how a business can break out from the competition in its service offerings, pricing model, delivery system, etc.
Define Your Goals.
One of the most critical barriers to enlargement is poor targeting. Defining niches and specialities allows companies to focus resources (of course, some companies are generalists by design). In the absence of particular objectives, companies suffer from unclear messages and, therefore, misalignment between sales and marketing.
Transparent target markets allow a company to create an integrated approach to sales and marketing, where marketing enables sales productivity. Sales and marketing plans will execute more effectively when targets.
Focus On Systematic Growth.
One of our Vistage member customers says, “A successful business is a growing business.” Companies can only afford to invest in technology, the best people, and new equipment through growth. The strategic plan must identify which segments a company will grow and by what proportion so that the product mix yields a specific net margin result. After reaching such conclusions, a company know how much it can afford in terms of capital expenditures, overheads, etc.
Make Decisions Based On Facts.
Executives often complain about the lack of good data, but we consistently find information that helps form strategy. We once worked with a Vistage member to quantify the value of various segments served. By accessing public records from a nearby port, we could quantify potential customers’ actual merchandise shipments.
Think Long Term.
Best-in-class companies create processes designed to treat strategy as an annual cycle rather than a static, one-time event. In the face of continuous change, preparation horizons are shorter than they use to be. However, thinking only quarter by quarter is a trap that can deprive companies of their ability to see what is around the corner.
But In An Agile Way.
Companies can think long term and remain agile. For example, a critical component of the strategy is an analysis of external forces. Companies must assess long-term external forces and adapt to pivot based on new information (meeting regularly, perhaps quarterly).
Also Read: What is a Bear Market, And How to Analyse
To be agile, companies include different people in their strategy more than in the past. When companies are hiring more millennial employees, there is more transparency. While I am never one to advocate for companies to open their books (since it is a personal decision of the entrepreneur), there is certainly a movement towards greater inclusion and transparency.
Invest time in the previous work.
If you want your managers to take strategy seriously, ask them to research and prepare relevant information before your strategy meetings.
Measure your results and execute with excellence.
Each strategy must be feasible. Companies that are best in class:
It have a strategic action plan that they frequently track (usually monthly).
- It will promote common ownership of the plan among executives and departments.
- They use key performance indicators (KPIs) that are predictive and align directly with the strategic plan.
- Will have cascading goals that reach across departments and resonate with employees to understand how their role contributes to the greater good.
- They set up the corporate calendar to promote productive meetings and establish a performance management cycle that supports cascading goals and objectives for each employee.
- Assess and repeat their strategy cycle every year.
- The execution of strategic planning requires discipline, and it is the responsibility of senior executives to promote processes that keep the team focused on the objective.
Also Read: What Is The Stock Market? And How to work