If you just listen to anything and everything people say about online trading and CFD stocks, you will get confused. In fact, these myths will distract you and you will miss out on opportunities in the market. It’s ok to take some calculated risks but at the same time, you must make informed decisions.
For that, you must be aware of the common online trading myths:
Myth 1: Higher leverage means more profits
Leverage is the ability to trade a large position with a small amount of trading capital. Higher leverage certainly means higher profits but only if the market turns out to be in your favor. Otherwise, you can end up in a loss. As a trader, you must understand that leverage is a double-edged knife. When you don’t do due diligence, this knife will cut you.
Instead of utilizing full leverage, spend your time researching and picking the companies that are strong. For new traders – trading using leverage can be risky. Only trade using leverage when you are certain of what you are doing. Just because others are making profits on higher leverage doesn’t mean you would too.
Myth 2: You can’t trade with a small account
If someone’s told you there is no way you can kick start your trading career with a few hundred dollars, they are wrong. It’s true that in the beginning, you will hardly make any money. But, with sound money management practices, as your account grows, you will be able to earn well eventually. All traders have to go through this phase.
So, in the end, it boils down to the fact that how much patience you have when you are starting with a small account. Take small risks as it will help you practice.
Myth 3: You will become rich instantly/ It takes years of hardship to become rich
Many new traders believe that they can get rich in a short time. There are others who think they can’t ever beat the market and hence they don’t even try.
You can hope to earn a good income as you step into the market but don’t expect to get rich quick. It will take at least 6 months to get to the point where your trading endeavors will start paying you off.
It’s true that you must some time to become a successful trader to start earning well from the market. As long as you are doing research, investing in the right companies and setting a trading strategy, your chances of succeeding are affirmative.
Myth 4: Trading online is not easy
Lots of traders need a second assurance before placing a trading bet. That’s why they reach out to their dealer and arrange a meeting with their broker for getting trading tips.
To succeed at this, you must believe in yourself. Most brokers keep you from opportunities that might be great for you because their concern is to just earn revenue by churning your portfolio. As you begin to trust your own research, you can save yourself a lot of money.
Myth 5: What goes down rises eventually
The truth is markets can remain volatile longer than you can remain patient. So, don’t ever trade assuming that the market will sudden rebound after a crash and you will finally turn the tables.
Yes, markets do rebound after a crash but that can take months and even years. Hence why it is recommended to fundamentally invest long-term in strong companies and ride the trend with short-term investments.
Myth 6: Volatility is always BAD
Volatility means how far a stock can move up and down. Usually, traders avoid investing in stocks during volatile times. But that’s a myth.
Volatility works both ways. A stock moves 20 % up is just as volatile as the stock that moves 20% down. The big winners mostly play in volatile markets. And volatility keeps on changing. Often, it moves up when there is fear in the market and moves down when there is complacency. Just when you think the volatility is low and it’s the right time to invest in stocks again, volatility can go through the roof.
Myth 7: A demo account is not that important
If you think that why you should waste your precious time trading with virtual money, you need to read this. The thing is, even if you have done tons of research, there is a probability you can lose. Hence if you are using virtual money instead of real money, you can save yourself from losses. Spending time on a demo account might make you impatient but it’s for your own good. You will learn how to become a patient and responsible trader. You will also learn what skills are critical for success as a trader. So yes, using a demo account is arguably pertinent.
Conclusion
For those of you who are new to investing, it is best to stay in your land. Don’t step in the territories you are unfamiliar with and don’t put all your eggs in one basket. You are allowed to test the waters and take a risk but make sure it is calculated. If you were in the dark and believed in the myths, now you know how to change your trading strategy without missing out on opportunities. Hopefully, you now have an expanded view of trading and so you can make the most out of your live trading to make profits.