Trading seems to be a taboo area for many. You will find your relatives and friends advising you against it. A few people may convince you how it is a sure-shot way to lose your hard-earned money. Honestly, if this way true, over so many years, how come the word did not spread around enough for people to stop trading completely?
There is no doubt that the stock market is volatile, and you may win or lose money because of one bad decision. It can be an impulsive purchase of stock or holding on to one for too long, fearing loss that you miss an opportunity. Trading needs you to take some calculated risks, so knowledge of the field and good research is needed for anyone to become a successful trader.
Here are some most common trading myths we are about to bust for you.
#Myth 1: Trading is Similar to Gambling:
This one is the most common myth that people have and pass on to others. People who think that trading is gambling and the loss and win completely depend on your luck have no knowledge of this field. Trading requires you to form a certain set of strategies that higher your winning chances. You keep a tab of the market and use tools to analyze the market that offers you some data to help you make decisions, unlike gambling, where you just have to wait for your luck to kick in.
#Myth 2: Stocks That Go Down Will Eventually Rise:
Just because a stock is down and it is a good opportunity to buy it, you should not jump into the opportunity. Not all fallen stocks rise. It may take years sometimes for that to happen. The main goal is to check how strong the company you are investing in, and it is worth the investment in the long term.
#Myth 3: Stocks That Rise Will Eventually Go Down:
This is another myth that people have related to the stock market. They assume that the only graph that a stock can have is to rise and fall. The stock price doesn’t have to come down if the value is currently high. It can also go higher if the company has excellent fundamentals. Hence do not make decisions based on this assumption.
#Myth 4: You Always Need a Broker for Making Investment:
Ok, so this is one of the topmost myths people have. The answer here is that you do not need a broker if you have the time to track the market movements constantly and a deep understanding of the stock market. But traders use brokers because of the multiple benefits they gain out of it. Brokers not just help you track the market, but brokerage firms offer you a set of premium tools that can be used for market analysis. So, you do not really need a broker, but it is wise to still have one. Research well to find the right brokerage for your trading needs and tradingguide.co.uk will help you with that.
#Myth 5: Higher Risk Results in Higher Return:
Well, this is not entirely false, as high-risk investments can really give you higher returns, but that does not imply that every high-risk investment yields similar results. The risk is higher meaning your probability of losing money becomes higher. You need a lot of experience, patience, courage and should be ok with the thought of losing your investment. Also, you should still research the investment opportunity well before you even decide to go ahead. Many successful traders tend to make several low-risk investments instead to get more profits in total.
#Myth 6: Too Many Tools is Always Beneficial:
Using tools to analyze the market is a great way to understand where to invest, but that is not the only thing you should focus on. The trader’s experience and their strategy are equally important to come to a decision. Using too many tools is like too many cooks spoil the broth.
#Myth 7: Buying Stocks that are in the News is Always Beneficial:
Buying stocks just because they are trending doesn’t guarantee an excellent return. In fact, these are the stocks everyone will be eyeing to buy. It is not all bad, but you should not buy something just because it is trending. Conduct good research on that company first and check if it is really worth buying their stock.
#Myth 8: Always Trust Your Instincts:
This is true in various areas of your life but when it comes to buying and selling stocks, more than instincts, trust the data and your knowledge. Creating the right strategy and following it throughout should be your only game plan. Stay disciplined to the strategy even if your instincts say otherwise.
The Bottom Line:
The power of trading has been underestimated because of all the above myths. Next time when someone comes to you stating one of these myths, you know the truth and can enlighten the other person as well.
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