In this article, I shall be addressing a number of myths about trading of financial instruments (i.e. stocks, FOREX, commodities, and etc.). This is based on my own personal opinions.
TRADING IS GAMBLING
It depends on how you conduct your trading. If you based your trading decisions on coin flips, or rumours, then yes, you are gambling.
However, if you based your decisions on Technical Analysis or Fundamental Analysis, then it’s not gambling. In other words, you need to have a trading plan and be able to explain why you entered a trade.
TRADING IS EASY
If it was easy, everybody would have become millionaires. Unfortunately, a majority of traders do not survive in the long term. Not just amateur traders but also professional traders.
Your success is determined by how hard you work. One needs to continue learning and studying about the forever-evolving financial markets.
You will not become a proficient trader by just reading one “trading for beginners” book.
Now, you may get lucky and still profit but the reality is, as Gary Player once said, “The harder I work, the luckier I get”.
TRADING IS HARD
Well, it doesn’t have to be. Trading can be made simple by drawing up a trading plan and following that plan to the letter. What’s hard is to actually control one’s emotions.
Trading is a psychological game folks.
TRADING IS FOR THE GREEDY
Traders are greedy and investors are not? Haha.
Traders’ style of making money is to try and profit from the markets’ short-term movements. Investors on the other hand try to profit throughout the long-term. Both implement different methods. One is not greedier than the other. The methods employed are just different.
In fact, to actually gauge whether a trader is successful or not, we need to look at his long-term performance. True, he tries to profit from short-term movements, but we need to look at whether or not he will be able to survive in the next 10, 20 years, or even longer.
By the way, as Gordon Gekko in the Wall Street (1987) said, “Greed is Good”.
TRADING REQUIRES YOU TO BE IN FRONT OF THE SCREEN ALL DAY
This depends on what you are. Usually, a day trader needs to be in front of the screen most of the day.
However, end of day traders, who trade based on end of day data, they only need to spend just a few hours per day, usually at night or early morning.
It all depends on the techniques and methods employed.
TRADERS LEAD A STRESS-FREE AND CELEBRITY-LIKE LIFESTYLE
Heck no! Trading is a stressful venture. Have you imagined a person trading while wearing board shorts and sipping a glass of mojito off the beach of the Bahamas? Now, knock that imagination off your head. Trading can be time-consuming and boring. Sometimes, trading signals are not generated for weeks on end. A full-time trader can sometimes do nothing at all but lounge around his house bouncing tennis balls off the wall.
ONLY BROKERS AND RICH PEOPLE CAN MAKE MONEY
With the creation of so many sophisticated products like CFDs and the availability of FOREX to retail investors, a person can start off with little amount of money. You don’t need to have $1,000,000 to start trading.
YOU ONLY NEED LITTLE KNOWLEDGE TO SUCCEED
Like I said, if it was that easy, every single participants of the stock market will become millionaires.
To become a good trader, one needs to study a lot, read a lot, and have loads of practical experience.
TRADING IS FUN
Actually, to answer this depends on the individuals himself. If your passion is trading, then trading can be fun for you. But for some, staring at the monitor and trying to figure out what the hell is on the screen can be rather boring.
YOU CAN’T MAKE MONEY WITH SHORT-TERM TRADING
Just look at Ed Seykota (his average return is 60% per annum), Richard Dennis, Bill Eckhardt, Paul Tudor Jones, and The Turtle Traders. They made a huge amount of money. Read The Market Wizards by Jack Schwager and you’ll understand what I mean.
Plus, if no money was to be made through short-term trading, the industry wouldn’t exist in the first place right?
I hope this entry somewhat intrigues all of you out there with the world of trading.
You know what, I like to regard the financial market as an equal-opportunity employer. Success is based on your skills and perseverance, and not based on race, or religion.
Whatever it is, have you heard of the statement that says Trading is a High Risk Venture? Now, that’s not a myth. That’s the truth!
Disclaimer: This article is not a specific nor general advice on managing or investing your money. This article does not constitute a recommendation nor does it take into account your investment objectives, financial situation nor particular needs.
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Other related posts:
– CFD Trading : An Introduction
– CFD Trading/Share Trading : Setting Stop Loss
– Investing & Trading. What’s the difference?
– CFD Trading/Share Trading : Stop Loss in Perspective
– CFD Trading/Share Trading : Being Long and Short (Concept of Short Selling)
– CFD Trading/Share Trading : Short Selling in Perspective
– CFD Trading/Share Trading : The 2% Rule