*OspreyFX would like to state that traders should research extensively before following any information given hereby. Please read our Risk Disclosure for more information.
True or False: 10 Common Trading Myths
The amount of trading information that is available can, at times, be overwhelming. However, knowledge is power and being armed with the right information can make the difference between a trading experience that pays off, and a trading experience that is less fulfilling.
In this blog, we are sifting through the information to identify the most common trading myths and truths.
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1) It is possible to have a foolproof system
This is certainly a myth.
It is not possible to have a trading plan that is 100% watertight. It is highly recommended that you continuously bring your A game to your trade plan and work on honing your strategies. However, anything can happen in trading and it is impossible to have a plan that will cater for all eventualities. So, make sure that you are prepared to the best of your abilities. Also, keep in mind that you will probably need to make a swift change or two at some point of the journey.
2) Starting small is good
This is technically false.
It is possible to start trading with small amounts and you can certainly learn a lot without suffering major losses. However, it is very improbable that a modest investment can result in a major return. So, it is safe to say that a $100 investment that becomes an overnight success is an urban legend and not a reasonable possibility.
3) Trading is not for everyone
This is true.
Just like many things in life, trading will probably not be everyone’s cup of tea. Having said that, however, it is also significant to keep in mind that dedication and hard work can go a long way. So, if you are determined to have a fulfilling trading experience; arm yourself with knowledge and patience and you will eventually get there.
4) Constant screen time is essential
This is false.
Monitoring your trades, trends and events is essential. Nonetheless, constant checking can very often lead to micromanagement, overthinking and sub-optimal decisions. So, keep in mind that stepping away from that screen and taking in the big picture is just as important as being present and alert.
5) Choose the broker that offers the tightest spread
This is technically incorrect.
An advantageous spread is very important since this will affect your trades’ profitability. However, your choice of broker should also take into consideration various aspects. Does this broker offer continuous support? Is there a secure ECN trading environment on this platform? Can this broker offer access to liquidity from reputable sources?
OspreyFX offers the tightest spreads available, 24/7 support, access to institutional grade liquidity from the top investment banks, a genuine ECN trading environment and access to expert insights, data and resources.
6) Losses are inevitable
This is true.
Even if you are a trading wunderkind, losses will still be part of your trading story. Planning, strategizing and learning will go a long way when it comes to attaining your goals. However, the markets will always have an element of unpredictability. Therefore, it may be possible to reduce the amount of losses but eliminating them in their entirety is not possible.
7) The longer the timeframe the easier it is
This is incorrect.
Just like your trading goals, the timeframes that you go for when trading is a highly personal choice. Apart from unique trading goals, every trader has a unique trading style. So, don’t be afraid to choose the timeframe that feels best for you; be it long-term, medium-term, short-term or a mixture of all three.
8) Emotions have no place in trading
This is false.
Planning, hard work and, to a certain extent, common sense should be the key ingredients of your trading recipe. However, this does not mean that there isn’t space for a sprinkling of instinct. A well-trained gut-feeling can be a guiding tool that complements our trading objectives and not something that hinders them. We have talked about this topic in one of our blogs, if you’d like to know more.
9) Forex is fraught with fraud
This is not true.
There are many reputable brokers that offer secure trading environments, access to transparent funding and sterling customer service. So, do your research well and don’t be afraid to ask questions before choosing a broker that you fully trust.
10) You will not be able to make a profit unless you are a professional trader
This is incorrect.
While successful trading requires you to put in the necessary resources and a consistent amount of time, making profit is not impossible when you are a new trader. It is also a good idea to identify successful traders that inspire you and learn as much as you can from their habits and trading patterns.
Myths, misconceptions and false truths abound in the financial markets. So, being able to discern accurate information from the market lore is the key to a trading experience that is rewarding and satisfactory.
Test out your strategy by using the Metatrader 4 demo.