Trading Myths Bulldozed

You can get rich quick

No, you can't. Not from trading... unless you already have a jumbo sized account and you are already consistently profitable. If that's the case, you probably wouldn't be reading this article! A lot of people subscribe to the trading myth of using trading as a means to get rich quick but end up risking a lot to try and make a lot...and this is what reckless amateurs typically do before they crash and burn. But any experienced trader will tell you this is not the way to go...They will also confirm it's one of the biggest trading myths about today!

The amount of money you can make from trading depends on the size of your account and your ability to make regular, consistent percentage gains from it.  But by knowing about effective trade selection and risk management you can turn chump change into a golden nest egg - but it will happen over time. As I've said before and I will say again, until you trade your way or are able to finance a big account of at least $100,000, treat this as a means to impressive capital growth...very much like the tortoise and the hair. Remember that one? The tortoise, prepared to plod the path slowly ends up thrashing the over exuberant yet complacent hare.

More is more

The more time you spend in front of the screen and the more trades you place does not mean you will make more money or have a higher chance of making a success in trading. Quite the opposite is true and I want to bulldoze this trading myth once and for all! Less is more and more is less. Successful and profitable traders always go for the quality of the trade over the quantity taken - even if it means trading far less or not at all.

Wouldn't that be a far better way to go rather than trading sub-standard set-ups just for the sake of being in the market? There's an expression: "Sometimes it's the trades we don't take are the ones what make us the money," and this is a reflection of our ability to stay out of the market when there is nothing trade-worthy. Always favour quality over quantity, without fail!

I need to watch my trades all day...just in case!

Watching your trades will not help them move in your direction, it will simply hinder you. But, for some reason, a lot of people get suckered into this folly. They entertain this trading myth as truth. In fact, it's more likely that watching your trade drift in and out of profit and loss will cause you unnecessary emotional exhaustion as nothing for the amateur trader can quite rival the emotional euphoria of seeing a winning trade, win, or indeed, the pain of watching a losing trade crash and burn. So, for that reason it's best to remain neutral but simply not taking part in this. After all, you have the choice not to by simply placing your orders up and walking away.

Trade gazing, as I call it, is not a constructive way of spending your time especially as it's highly likely you chose trading as a means of getting your money to work hard for you...not the other way round! Accept that trading is a game of probabilities and that, providing you entered your trade when all of the rules of your strategy were fulfilled, be content with both outcomes.

If it's a loss in your absence, then console yourself with the fact that, if you're trading a profitable strategy, that losing the battle is necessary to winning the war. After all, it's the net sum of all trades which determines your success in the markets (or rather, your strategy's).

I can make money every day

The irony is that the majority of people, particularly newcomers, who try and make from trading everyday simply end up wiping out their account as a result of overtrading. If you believe you can do make money trading every day then let me ask you this:  what do you plan to do if you don't see the trade set-up which is based on the strategy? Perhaps the best thing you can do on days like that is not to trade and preserve your capital. Believe it or not, capital preservation is the first objective for any trader - the second, naturally, to make money.  But markets are completely random and chaotic - they can do anything at anytime and they certainly don't care about fulfilling the hopes and dreams of those who have an insatiable appetite to be in the market all the time.

The market doesn't owe anyone a living and tradable opportunities in the market don't occur every day; they can occur at anytime though. Some weeks you could find many, other weeks, perhaps none. However, as long as you able to make an overall gain over the net sum of the trades taken over a decent period of time then this is all you need to be a successful trader. When you need to do then is to then hang on to your gains.

Higher timeframe trading is less profitable

It's an all too trading myth; that because there are less set-ups on the higher timeframes, trading the daily chart is simply not as profitable as the smaller timeframes. As I have said before, the quality of the trade means everything; its profit potential in addition to how many technical reasons are in support of it over and above the frequency of them. Fortunately the higher timeframes allow us to take advantage of big swings in the market like no other smaller timeframe but over an extended period of time.

Not only do we have a far greater degree of stability on the higher timeframes, reducing our exposure to the noise, madness endured by intra-day traders on the smaller order timeframes, we are able to further protect ourselves by having our protective stop loss a greater distance away from our entry price.

The trade-off is that we have to wait longer to realise profits. But this should not be viewed as a hindrance. After all, we now understand that we are in it for the long-haul gain rather than a fast buck. However, the waiting game is one of the hardest for many a newbie; the patience for the trade set-up which fulfils all the rules for entry in addition to waiting for it to hit its profit target.

The broker is not out to get you

A lot of people think this, but you shouldn't. It's one of the biggest myths there is. Let's get real; blaming the broker may be a very convenient thing to do in the heat of the moment but it often does not hold a lot of weight. Consider this: brokerages are run as a business. They have a financial incentive to attract and serve their client's for the long-term. After all, they make money from the spread of every a trade that is traded by the client. So don't you think that it makes good business sense to retain a satisfied client who trades for years rather than to run the risk of losing them as a result of a one-off, penny pinching wheeze? It's a competitive market out there, with numerous brokerage houses all clamouring for our business. With that in mind, it would be very short-sighted from a business perspective for them to rip off their clients.

Broker bashing is very common in trading forums online but beware! Many claims are inaccurate and written by people who do not understand that spreads widen at times of volatility of illiquidity and simple want to attribute blame to the number one scapegoat; the broker!

It is from my experience of mentoring private investors that the people who incessantly blame the market, everything and everyone for their trading mishaps over and above taking an introspective look at how they can proactively change their trading for the better are entrenched in an amateur's mindset. Ever heard the expression: "a bad workman always blames his tools?"

Those who always blame the broker are typically those who are unable to take ownership and responsibility of your trading as a business. If it's not the broker's fault, then it's the market. If it's not the markets fault then it's the charting software.

As a rule of thumb, shop around choose a reputable broker who is regulated in the country where you are a resident and make sure you read and understand their terms and conditions. We recommend our best broker on a variety of factors. Yes, they have been rigerously vetted to being you the best deal.

You must know about the news and fundamentals

This is another biggie of a trading myth. Many people delude themselves with thinking that the more they know about the news and fundamentals off the charts, the more informed their trading will be when it comes to profiting from what they see on the charts. This is hogwash! As technical traders, it's our job to analyse the story told between bulls and bears according to what the chart is telling us at that precise time.  The expression: "trade what you see not what you think" rings true here. Do people who know more about markets make better traders? Not really. Much of the bottom line of a trader's profit and loss statement hinges on their ability to apply themselves by knowing what to do and when to do it.

The irony is, adding the extra ingredients of fundamentals in the form of news, historical data releases to our decision making process simply clouds our judgement and makes trading far more difficult than it ever needs to be!

This is where the law of diminishing returns creeps in. What may seem like a logical and justified pursuit of more information to help the best possible trading decision may very well hinder you.

Knowing less about the markets and what is going on away from the charts in terms of news and fundamentals will actually make trading a far less time-consuming and far more decisive. It will also make your trading decisions far faster and your thinking, more fluid. After all, the market isn't going to wait for anyone who dithers.