We live in a digital age where anyone with access to the internet can gain knowledge and information whenever and wherever they are. Unfortunately, there’s a lot of misinformation out there.
From “trading is like gambling” to “you need a lot of money to start”, many myths and misconceptions exist about the world of online trading.
The best traders in the business adapt their approach to the ever changing market conditions.
Those who can’t recognise the environment has changed or are too inflexible to adapt will fall at the first hurdle.
This is the real skill in trading. Adaptation. Knowing how and knowing when.
A good place to start your journey in online trading is to partner with a regulated and licensed broker, such as CMTrading.
There are a lot of trading myths out there that you need to know.
Let’s look at the Top 7!
1. More Screen Time Means More Profits
Nothing could be further from the truth. By watching the charts for hours and hours you are more likely to dip into the markets at the wrong time.
There are only so many good trading opportunities in any given day. They don’t just magically appear when you’re watching your screen for a long time. You’ll end up feeling that you must conduct some trades or believe you’ve wasted your time.
This is when you end up making bad trades and lose money. Most professional day traders have done chart analysis before the markets have even opened and are waiting for the price to reach certain levels before they take action..
More screen time generally means more trades. More trades however does not necessarily mean more profits.
2. A Holy Grail Trading System Exists
Although there are thousands of charlatans online claiming that they have a magic trading formula, the reality is that is does not exist.
There are trading methodologies that have a higher probability of being more successful than others but ultimately 80% of success in the trading game is down to risk management and psychology.
Focus on this first and you’ll see your trading profits soar!
3. It’s all about Finding the Best Entries
The actual entry is less than 20% of the total trading decision process. You got the exit, the system, the risk management, the market conditions, the environment, the news and a few others you will need to get yourself up to speed with.
Don’t obsess about the entry, it’s only one cog in the trading wheel.
4. The More Technical indicators you use the Better
Overloading your charts with technical indicators will not help you identify where the price is likely to go next. Too many different types of indicators on your charts can give you conflicting signals.Keep it simple with your charts. A few technical tools such as trend lines, support and resistance levels and moving averages are all you really need if it’s combined with a solid strategy for entries and exits.
Also getting a handle on the effects of news (both economically and politically) on the markets will give you a better perspective of what is going on and will take your trading to the next level.
5. Trading is Gambling
It’s the trader that’s gambling not trading itself. If someone is reckless, has unrealistic expectations and is not prepared to learn the game, well that’s a completely different conversation.
Trading is a skill that can be learnt, gambling is game of chance and luck. There is no comparison.
6. You Can be Right Every Time
Professional traders don’t get every trade correct. That’s a fact. Anyone claiming they do is probably selling a service related to trading and likely has never made any money from the markets themselves.
The difference between a pro trader and an amateur is that the pro makes more money on his winners and less on his losers resulting in a healthy return on their investment.
7. You Need a Lot of Money to Trade
Not true. You can start a trading account with $100 and grow it slowly. You need to put your account size into perspective and think more in terms of percentage returns rather than dollar returns.
If a trader with a $100 account make 30% – 40% a year with a low-risk approach, that would be an incredible performance.
If they can’t invest more of their own funds, they can use this track record to attract investors and trade their funds and charge a performance fee in the process.
What could this same trader do with a $100,000 investment?
CMTtrading is here to help you on your trading journey and provide you with the guidance and support you need to succeed. Click the link below to get started.