Trading Myths Debunked - Introduction
Books have been written, videos created, and articles written on day trading. If you are new to the trading scene, chances are that you have already read articles on traders who lost or made millions. You are not alone. We have all seen the fancy lives displayed by ‘successful’ traders. We have also seen the other side of traders who have lost all their money. In this article, I highlight the five key trading myths that you will come across.
#1 - Trading is Gambling
This is one of trading myths that is very common among opponents of day traders. They equate trading as a simple gambling activity where you open a trade, and pray that it goes in your direction of choice. The fact is that this depends on an individual. There are traders who take trading as mere gambling while others take it as a scientific method of making money. Traders who open trades without doing any analysis are simply gambling. This is because they open a trade without a valid reason. Real traders understand the reason why the market moves. They understand the idea of demand and supply. They also understand that making a good decision depends on doing research on the underlying stock, commodity, or stock.
#2 - You Need a Lot of Money to Start
Another of these trading myths is that you need hundreds of thousands of dollars to start trading. The truth is that anyone, from any country can start trading with as less as $300. There are many brokers who offer trading services. This competition has led to an ease in the barriers to entry. In the past, it was not possible to be an active day trader unless you had thousands of dollars. The fact is that you don’t need a lot of money to start trading. However, you need to understand that trading with a very low amount is relatively risky than trading with thousands of dollars. Therefore, to have a successful trading career, you should be careful with the money you use. You should only trade with the money you can afford to lose. Once you deposit your funds to a trading account, you should assume that you don’t have it anymore.
#3 - It’s a Man’s World
A common myth is that trading is a man’s job. In fact, most female friends have complained about this. The fact is that anyone, at any age can become a successful trader. A good example is Ingeborg Mootz who started trading at 83 and made more than $500,000. Her story has been highlighted by a number of magazines such as the Global Brands Magazine. Kathy Lien, is another woman who has made a fortune as a trader and author of forex related books. In addition, a look at the top leadership of most investment banks will reveal a number of top women traders.
#4 - Day Trading is Easy
Many people have written about how easy it is to make money as a day trader. They state that all a person needs to do is to open a trade, watch it (or set up a take-profit) and then make money. The fact is that making money as a day trader is more difficult that. It involves a number of steps that one must follow to be successful. For instance, one needs to take time reading about the financial market. Then, one needs to understand the platform. Finally, one needs to have a strategy to use as a trader. In fact, most people who start trading fail.
#5 - Many Trades
The final trading myth about trading is that one needs to open many trades per day. It is also said that successful traders understand many ‘assets’. The fact is that the opposite is correct. The more trades you open per day, the more risks you present to yourself. Successful traders open a few trades on a daily basis. They also take time to master one or two ‘assets’. For instance, there are traders who have made a lot of money trading crude oil without focusing on other items.