By Katie Gomez

The trading market takes on many forms. You can trade anything from stocks, real estate, bonds, start-ups, commodities, or currencies. Keep in mind that no matter what you are buying or selling, there are myths that can cloud your judgment and even sway your decision-making, which is why I’ll debunk five popular trading myths. 

Myth #1: Trading is just gambling

The market is often misconstrued as a glorified gambling ring, especially when viewing the 1:1 risk-reward ratios. The 1:1 ratio might seem like gambling because it means your wins and losses are the same sizes. However the ratio does not disclose how many winners and losers you have, that makes this a myth. 

For instance, if you have 100 trades (70 winning & 30 losing trades), you are still turning a profit even with that 1:1 ratio. If you are not confident and consistent in your risks and have no plan, you are gambling because there is no experience or strategy applied. As long as you have a successful ratio and trading plan that works for you, you are trading like a business person, not a gambler playing a game (relying on luck to win).

Myth #2: You can’t trade when you have a full-time job. 

Although becoming a day trader might seem impossible with a full-time job, anyone can become a swing trader. Swing trading is for people who do not have the time or luxury to be glued to their computers all day, making a trade every one to five minutes. Day trading is not the only option. Swing traders can make trades in longer time-frames and still make money trading with the right strategy (link to swing trading blog) 

Myth #3: Stocks that go up must come down.

The laws of physics don’t apply to the stock market. The way the stock falls has nothing to do with gravity but everything to do with the company. With excellent management, a stock going up may continue to rise. For example, Berkshire Hathaway’s stock share price went from $7,455 to $17,250 in five years (Foelber, 2018). If you had waited for the price to come down before you bought stock in this company, you would have missed out on its meteoric rise to $170,000 a share, all because you believed it had to come down. 

Myth #4: Stocks that go down must come up. 

Newer traders are quicker to believe this myth because they have a more idyllic view of the market and how it must end up fair. These newer traders tend to buy a stock low and hope it will sell at its high from the year prior. Most traders eventually learn to base their decisions on more than just price to become better investors. Trading is more than just waiting and watching stocks go up and down; it is about taking calculated risks at the right time, using instinct and patience to drive your decisions, and not always looking for the easy way out. 

Myth #5: It’s a Man’s world. 

Though this saying might have rung true about the market a few decades ago, the population of traders is more diverse now. In generations past, only a handful of people knew the secrets of success, and those people were men. Recent studies show that female traders are on track to surpass males in the industry due to their more cautious and patient nature than men. Although trading can be cutthroat, it also requires a more delicate touch. A perfect example of the modern trader is Ingeborg Mootz, a woman who began trading at the age of 83 and made more than $500,000, proving that not only can you be a woman and a trader, but that it is never too late to start. 

REFERENCES

(2015, July 7). Ingeborgmootz – the elderly millionaire. Global Brands Magazine. Retrieved September 21, 2022, from https://www.globalbrandsmagazine.com/ingeborgmootz-the-elderly-millionaire/ 

Ruzicka, A. (2022, April 27). Are women better traders than men? Retrieved September 21, 2022, from https://capital.com/are-women-better-traders-than-men