Busting The Top 5 Myths About Becoming An Online Trader

The world of trading stocks and securities is a misunderstood and often cutthroat world, leading to many negative stereotypes people have surrounding the act of trading. Online trading can seem especially scary when you don’t have a broker to call or a financial advisor to help you make the best decisions for your financial future. But dipping your toe into the shark-infested trading waters doesn’t have to be nerve-wracking.

Trades Have To Be High-Risk To Be Profitable:

We’ve all heard stories about the man who traded $1,500 in penny stocks over three years, turning that meager sum into $1 million. They’re nice on paper, but they lend credence to the myth that all trades need to be high risk. That’s not true. Before you make your first trade, you should consider the purpose of your trades and how much profit and loss you’re willing to accommodate in your trading. Taking moderate gains and not letting your emotions get the best of you is how to grow your wealth when trading. Sure, those high-risk investments have a chance to pay off, but you probably have a better chance of being struck by lightning than picking a winner the first time you invest.

You Need To Be An Experienced Trader To Make Money:

Sure, flashy hedge fund managers rake in millions per trade, but you don’t need that kind of success every day to be successful with online trading. Proper research and due diligence into the companies you’re considering investing will take you farther than being an Ivy-league math whiz ever will. Services like Robinhood make it extremely easy for the average joe to start trading online, especially if you’re not operating a margin account. Picking a few blue-chip stocks and watching your portfolio fluctuate according to news is a great way to learn how the market reacts to news and in the process, you may make a few dollars while you learn.

You Already Have To Be Rich To Be Successful With Trading:

While it’s true that more money does mean more earnings potential, you don’t need to be trading thousands of dollars every day to make money. Starting small with a diversified portfolio while you’re learning will help you minimize losses and build a successful trade track record. Online brokerages like Ally Invest and TD Ameritrade offer low-cost stock trading options for the more serious investor, but beginners will be fine starting out with an online trading app like Robinhood.

Every Trade Has To Be A Win To Be Successful:

This myth is probably the number one point that gets stock newbies hung up on their performance. Having a few misses where you lose money is not going to end you if you’ve properly diversified your portfolio. Risk and reward ratios are a great way to determine if a trade is worth making and you should emotionally prepare yourself for the possibility that it could go awry. Doing this before making the trade helps you keep a level head when deciding when to cut your losses or take your gains and exit your position.

Automated Trading Systems Will Earn Income Passively:

With advances in technology like machine learning and trading algorithms, it’s tempting to trust all of our trades to our robot friends. However, you should understand that these bots can and do make mistakes that can be costly if you don’t know what you’re doing. You should never buy a bot from any software programmer who promises passive income from trading because there is no substitute for proper due diligence.