MYTHS AND MYTH BUSTING IN TRADING
It is not surprising that there are so many misconceptions associated with stock market. These myths are not new to us. There are myths and misconception related to trading which have been holding us back from investing in the stock market. Now let’s check whether all these are true or not.
Trading is gambling
This is the one of most important reason for most of us to stay away from stock market. People equate trading to gambling. Gambling is the act of doing things for an uncertain outcome. But trading is not like that. You invest your money with your time, knowledge and experience in trading. Each of these component pays off at last while you make profit. Like any other business trading also involves risks. But the risks can be minimised with our practice and dedication.
Trading is rich man’s sport
This is one of the most common myths related to trading. Many people believe that trading is a rich man’s sport. But that snot true. Anyone can trade if you have an online trading account and good internet connection. You can start investing with very small amount of money. Your consistent profit from this small money will help you to earn more.
What goes up will eventually go down
There is no universal low in stock market. Every change in the price of the stock is affected by certain factors. If price of a stock goes up, there is no rule that it will comes down eventually. Never trade assuming that the market will rebound. I am not stating that stocks never undergo a correction, the point is that the company reflects itself in the stock price. Rice and fall of stock price of the company depends on the overall performance of the company. And there is no such rule.
Leverage is good or bad?
We can’t say that leverage is good or bad. It is just a tool in trading. It is double edged sword which can hurt you if you use it without adequate knowledge. Higher leverage sure means higher profits if the market turns in your favour. But trading with a large amount of leverage and huge position sizes can be suicidal when the market is against you.
There are lot more myths related to grading out there. Only the knowledge of the market will save you. Every day is need not be successful. But adequate knowledge and patience will reach you high.