The lucrativeness of trading would be vouched for by many seasoned traders. And yet, people are skeptical and worried about setting foot in this arena, even with things like a margin calculator and online trading making things easy nowadays. One of the factors to blame for this attitude is the widely believed trading myths. So, once and for all, let’s burst four of the most common trading myths that people believe.
Myth 1: Trading is similar to gambling
When you aren’t prepared, a lot of things will feel like gambling, such as driving a new car or trying to catch the ball that’s coming straight to hit your face. The fact is that these are acts that need practice to master and have a couple of rules that you need to follow. You are going to land in trouble if you go unprepared and don’t play by the rules.
Similarly, trading is an arena where you can completely turn the tables if you are ready to put in the devotion and hard work. Of course, trading involves a risk element. But you can increase your rewards and minimize the risks through diversification, trading based on research, following stop-loss regulations, and relying on a trustworthy platform like Espresso dial-N-trade.
Myth 2: High leverage translated into bigger profits
Why would a stockbroker keep rules like interest on margin shortages or auto-square off if this was true? Higher leverage translates to higher profits when the market is in your favor. However, you also face high losses when the opposite of this happens.
The truth is that leverage is that double-edged sword that can hurt a customer stealthily. Thus, it is better to never use the complete leverage that is extended. You need to spend your money and time in choosing the finest companies that are strong and can keep you in profit for the longest possible time.
Myth 3: As it goes down, it will rise eventually
Markets have the capacity to stay irrational longer than an investor can stay solvent. It is wise not to trade thinking that the market is on its way to recovery after a crash. You might keep waiting for an eternity and finally exit at an unfavorable level.
It is not like markets do not rebound after crashing, but this might take years or even months. Consider the case of DJIA that took more than twenty years to recover after the mega crash of 1929. Thus, the best strategy is to go with the trend during short-term trading, and put your money in fundamentally strong ventures in the long haul.
Myth 4: You can start trading online by yourself
Well, this myth is not technically wrong because you can start online trading on your own. However, if you are a beginner with nothing but the basic trading knowledge, you would need the help of a broker to direct you along the right path.
It is high time for you to stop believing in these myths, and start your trading journey.