What Can Traders Learn from Lean Principles?

What are Lean Principles?

Lean manufacturing was first implemented at the Toyota production plant, but it has since found favor in many areas, not just manufacturing. In simple terms, lean principles are designed to eliminate waste, cut costs, optimize processes, reduce time to market, and boost innovation. If done correctly, lean manufacturing delivers greater value to the customer in a more sustainable way. 

Eliminating waste and improving productivity makes perfect sense in a manufacturing environment. But these principles are also valid in many other environments and adopting them is a more efficient way of running a business, whether you sell cars or trade stocks, crypto, or forex. 

A Dynamic Investment Process

Trading is an individual process and all traders have their own way of doing things. There were 14 different principles in the original “Toyota Way”, but for the purposes of this article, we are going to focus on the three guiding principles of lean manufacturing. These are:

1. Customer focus – your customer might be clients paying you to trade on their behalf, or it could be your bosses if you work on a trading desk in an investment bank or for a stockbroker. 
2. Eliminating waste – waste could be money wasted by making poor trading decisions or excessive fees paid by not using the most cost-effective trading platform; in simple terms, waste is anything that harms a trader's investment returns. 
3. Continuous improvement – traders must learn from their mistakes and seek to make improvements in their processes; in lean manufacturing, this is known as Kaizen. 

What Can Traders Learn?

When lean principles are applied to manufacturing, the end goal is to boost value. Whether that means achieving greater productivity or improving the quality of the product enough that the market can stand higher prices is immaterial. The fact is that value increases. 

New traders are often inefficient. They haven’t worked out their process, so they don’t have a trading plan. It’s important to treat trading as a business, and if you are running a successful business, you have a plan. 

Eliminating Waste 

Eliminating waste means identifying areas that are harming your investment goals. Think about what you can do to improve your processes. Are you in the habit of making trades on a whim? Are you paying high fees on your trades? 

Look at where you can be more efficient. Perhaps you don’t have set trading hours, or your equipment is old. Consider investing in new tech and trading at set times. Review the trading platform you use to see if you can’t find a better deal elsewhere. Check what fees you pay for trades – it might be you are losing money unnecessarily. 

Improve Productivity

We have already mentioned some aspects of improving productivity, such as trading at set times, but there are other ways to boost your productivity as a trader. 

Use technology to help you make better trades. Market updates via a smartphone let you monitor your trades from anywhere. A faster internet connection can make a big difference in short-term trades. These are things you can easily change, although moving house so you can live nearer an exchange and enjoy better connection speeds is a big step.

Trading is a business, so treat it that way. Decide what hours you plan to work and make sure you are sitting at your desk during those times. Do not allow yourself to procrastinate. Focus on your trading plan and stick to it like glue. 

Using filters can also help to improve productivity. For example, rather than analyzing a broad spectrum of companies when searching for new investment opportunities, apply quantitative filters. This way you won’t end up wasting valuable time analyzing low value companies that are unlikely to be good investment opportunities. 

Continuous Improvement

Whatever your area of expertise, the world does not stand still. To stay ahead of the curve, you need to keep your skills up to date and educate yourself on the markets. In the manufacturing world, you might decide to study for a masters in manufacturing engineering from Kettering Global, but as a trader, there are other options to explore. 

Dedicate a part of your day to learning new things. Become a diligent student of the markets. Hard research is important, as it can make the difference between successful trades and unsuccessful ones. As a trader, you probably already know that many things affect the markets. 

These include news events, global political events such as elections, economic news and trends, such as interest rate cuts and budget announcements, and more. Even the weather can impact the market, and let’s not dismiss the impact of social media posts by influential individuals – Elon Musk and Dogecoin anyone?

The point we are making here is that traders need to understand current and past events to make sense of what the markets are doing. The more time you can devote to learning about the markets and the tools at your disposal, the better. 

In Conclusion

The main guiding principles of lean manufacturing are still being used today, and not just in the car manufacturing industry – businesses all over the world apply lean concepts to their business processes and courses like Six Sigma are hugely popular. 

As a trader, it is important to understand the merits of being open to different principles when seeking to improve an investment portfolio or become a more profitable forex trader. While manufacturing doesn’t appear to have much in common with crypto or forex trading, there are things we can learn from the lean principles applied at factories like the Toyota plant.

Rather than taking these principles and applying them on an ad-hoc basis, incorporate them into your entire approach to investing. Pay attention to productivity. Focus on continual improvement. By cutting costs in your investing activities and delivering greater value, your investment activities will be more worthwhile, and you are more likely to make a good living from your portfolio.