There are many misconceptions and false assumptions surrounding trading. Sometimes it’s the public who uphold these myths; sometimes it’s the actual trader themselves. Understanding and overcoming these misconceptions will give you a better understanding of the reality of trading and help you avoid wasting your time on unproductive paths. Let’s debunk 5 of the most common myths of trading.
You can get rich quick
Yes. Earning a substantial amount of money is possible in trading. Traders can earn a good income from the markets, but it isn’t easy and most of the time, you won’t get rich quickly. Expect to put in several months to a year of hard work before your trading expertise starts to pay off with consistency. Like with anything in life, there are no guarantees.
You don’t need a trading plan
Simply put, trading without a plan can set you up for failure.
As a professional trader, Toronto’s Matt Choi, founder of trading education company, Certus Trading, knows firsthand about all of the common misconceptions surrounding trading. One of those myths is that you don’t need a trading plan.
He explains, “Being successful in trading is not quite what you think. It is more than just strategies and formulas. You need to find a trading style that fits your own personality.”
Matt Choi says that all traders need to develop a trading plan that is suited to fit their own trading personality so that they can stop struggling, and start achieving consistent profits.
You don’t need to understand the markets
If you’re not well-versed in the basics of the stock market, then you should really have at least some basic information about how stock trading works. First, you have to really take an interest in the industry. You have to be willing to learn about its history, and how it has evolved over time. Once you have a good understanding, you can start honing in on a few strategies that work best for you and then eventually come back to the things that you’re most passionate about.
You need a lot of money upfront to succeed
Often, traders believe that to succeed at trading they need a large trading account upfront. The truth is, you can lose money on big trade just as fast as you can on a small one. When starting out, it’s probably best to start smaller and then work your way up to building a large capital reserve. But, if you know how to build a track record of successful trading on a small account, you will likely become a successful trader.
Trading is gambling
Perhaps the biggest trading misconception is that trading the markets is the same as gambling. This is a stereotype that non-traders and the general hold true in their minds.
The reality is if you treat trading like a valuable profession that takes time and persistence to get good at, you’ll be more likely to succeed. Unlike gambling, you can put the odds in your favor as a trader through proper trading education, learning from a mentor or an experienced trader and doing your own research.
There are many trading misconceptions out there but the key to debunking them is understanding that trading takes time to master. Regardless of which trading method you use, research and practice it so you can see if it actually works for you.