Online trading has become very popular as a way to make an extra income from home and so much has been said about this matter, often inaccurately. So in this article, we’ll go through the top 5 myths and misconceptions of trading.
1/ Trading Will Make You Rich
Most people want to get into trading because they hear about the big profits that are being made in the financial markets. Everyday, big investment banks, hedge funds and even some sharp retail investors are making a lot of money trading and the idea of doing so from home on your computer is very alluring. However, there are no guarantees in trading and approaching any form of investment with the hope of becoming rich quick is definitely not the right way to do it as you will most likely put too much pressure on yourself, make unnecessary mistakes and probably lose money. Take the time to learn the game, sharpen your trading skills and make conservative trades and steady profits.
2/ Trading Is Easy
We strongly believe that every skill is learnable and that certainly includes trading. However, it is definitely not easy and requires knowledge about many different fields. No matter what you want to trade, you need to know about finances in general, the markets you want to trade and the industries that influence the prices and most importantly you need to know about technical analysis. It takes time to become a good trader and we always recommend to practice on a demo account first to get a feel for it before risking your own money.
3/ Trading Is Gambling
Even though there is a part of luck in everything in life, trading is not gambling. Making the right calls at the right time has a lot to do with your ability to use the tools and indicators to predict the next price move and being aware of latest news and developments in the markets you are trading. Having a concrete plan and a trading strategy is also crucial and will ensure that you make consistent profits over the long run. So for those of you who think that online trading is like roulette, stick to the casino!
4/ You Need A Lot Of Money To Start Trading
You need money to make money. This principle is true for every possible form of investment including trading. The bigger your trading account is, the bigger the profits. It also allows you to trade safely and dedicate only a small portion of your funds to each trade. That having been said, thanks to margin trading, you don’t need to start with a big capital to make some significant profits. Only invest what you can afford to lose and remember that losses can exceed deposits when trading on leverage.
5/ Trading Is More Risky Than Real Estate
This might be a bit of a controversial one but in our minds, every form of investment contains risks and it’s the responsability of the investor to acknowledge and minimize those risks. Trading is not necessarily more risky than gold or real estate if you know what you’re doing. The bottom line is that you should invest your money in assets that you understand and know well.