Four trading myths busted

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A brief Google search can quickly reveal all the trading information you could ever possibly want or need. That’s great, on the surface. But when it comes to wading through this deluge of information, how do you know what’s good, what’s bad, and what’s just plain ugly?

To help you decide, here we identify four major trading myths. Make sure you’re aware of these, particularly if you’re new to trading. Keeping these in mind will really help as you begin your trading journey.

1. Trading will get you rich quick

After seeing what influencers on social media claim to have achieved through short-term trading, it’s tempting to want to copy them and dive straight in. But those starting out on their trading journey would do well to see these as cautionary tales, rather than success stories.

Successful trading is a marathon, not a sprint. You need to study markets and plan your trades carefully, and always carry out disciplined risk management. As a trader, you want a long and successful career. That can’t happen if you lose your risk capital on a few rushed and unplanned trades in your first few months.  Don’t be sucked in by the affluent lifestyles of the rich and famous on social media, as many of these stories are fake.

The problem with most get-rich-quick schemes is that they simply don’t work. If they did, everyone would be successful overnight. If you need to raise some cash quickly, trading will not be your best option.

2. Trading is easy

It’s so tempting to jump straight into the fun part, but if you’re new to trading, make sure you take your time. Research and education are important factors in protecting your hard-earned money.

Before you begin, take time to research the different ways to trade. Work out the best trading style for you, whether that is day trading or a longer-term approach. Consider which markets you find of most interest, take some time learning how to read price charts and practise using drawing tools and technical studies to help analyse the way markets can move. There is no one-size-fits-all approach to trading, as there are a lot of different markets and approaches to trading. Fortunately, the trading experts at Trade Nation have put together a variety of trading guides designed to help beginners get off to a good start.

3. You must have a high IQ to trade

Some people think it’s just those with, say, a PhD in Mathematics who can understand quantitative data well enough to use indicators correctly. Intelligent trading goes beyond IQ or academic qualifications. 

Highly intelligent, academically gifted people don’t always make the best traders. While it’s certainly beneficial to look at past performances on which to base your trading decisions, beginners should be careful not to let data-based decisions guide them too heavily. That’s because these decisions can only be made on historical data – the past – rather than real-time information. Sometimes an element of risk-taking is required.

Don’t let a lack of traditional formal qualifications put you off. Once you get to know the context of what you’re trading, you’ll see how it’s the mindset that determines success, not the ability to pass exams. The most valuable thing a trader can possess is the right mentality.

4. Just copy what other traders are doing

You can see why many new traders decide to copy other traders. After all, how much easier it must be to follow someone who has already put in the study and hard work, rather than making the effort for yourself. If a trader can prove they’ve been successful in the past, it’s logical to assume that you will be too by simply copying what they do in the future. But that would only be true if your trading plan, the amount you’re investing, your circumstances, and all other elements also exactly match the person you’re copying.

In reality, that’s just unlikely to happen. You might save time and effort in the beginning. But you’ll never learn how to trade yourself by passively mirroring someone else’s actions. Also, don’t forget that even experienced traders make mistakes. There are plenty of horror stories describing such situations which should make you wary of blindly copying anyone.

In addition, sadly some new traders have fallen foul of costly scams, in which a self-proclaimed ‘master’ ends up making millions from unsuspecting beginners.

So, whether you’re just starting out or already working your way through the jungle of financial markets, the key thing to remember is that with time, diligence and trust in yourself, your trading ability and skills will grow. Don’t cut corners — use your head, and forge your own path.

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