The Truths and Myths Behind Trading as a Business
When it comes to trading stocks and shares, there are many myths that surround the decision-making of investors. Statements like ‘buy the dip’ and ‘Hold’ are often seen when talking about the market. You can find all the information to make the best trades possible using an OANDA login.
Buy and Hold Forever
Trading Myth – Investors that jump in and out of stock are more likely to lose money. It is better to hold onto investments for a longer duration of time to generate more revenue.
A leading stock typically runs for 12-18 months, then declines steeply and for a prolonged period. Moreover, leading stocks often never return to their highs after they reach their peak, or it takes them years to return. Upon the end of a stock’s run, what happens? Eventually, it ceases to rise or fall, erasing any gains you have made. At the same time, other stocks are on the rise unless the market is in a bear market.
In order to make the most of a stock’s run, it’s better to recognize the signs and sell them when they are evident, then put the proceeds into a stock that is showing signs of rising. If you do that, you won’t be sitting on dead money.
Stock Charts Don’t Matter
Trading Myth – Stock charts do not help as they have no predictive power to what the future holds. Serious traders will always stick to company fundamentals to ensure they are making the best decisions.
When it comes to investing in stocks, stock charts are incredibly helpful tools that can help investors determine when it is a good time to buy or sell a particular stock. Investing in the right stocks depends on fundamentals, and charting gives you a sense of when to buy and sell them.
Buying Low and Selling High
Trading Myth – The myth surrounding this idea suggests that the best time to buy any kind of stock is when it has fallen by a large amount.
Research and history show that the best time to buy some of the most significant stocks has always been when their trading price has been at the highest. The majority of these stocks have seen a small dip around the highest price point and then surpassed that, creating more revenue than ever before.
Cheap Stocks are Better for Inexperienced Investors
Trading Myth – A lot of investors, when they start their trading journey, believe that they have to begin with a smaller amount of investment capital, meaning they cannot buy stocks that are larger than a certain price.
In a world where Adobe stock is trading for over $600 per share and Google is trading for almost $3,000 a share, Adobe stock appears out of reach to most people with $500 to $2,000 in their accounts. If you buy dozens or hundreds of shares at $10 or a penny stock, you are making a statement, while buying a few shares of a high-priced company is not a good investment.
The number of shares you own isn’t the most crucial area of trading; the percentage gain on the money invested is the vital area. The average price of the main stocks leading the market sits at a price of $32 per share. This means that you are much better off buying fewer stocks with a greater value compared to lots of stocks with a much lower level of quality.
Fractional shares, which are smaller parts of high-priced stocks, are available from many brokers and trading software these days. The fractional shares of popular companies such as Amazon and Google can be bought for as little as $5 through online brokers. If you have a small account, it doesn’t mean that you shouldn’t have the ability to buy one of the better companies when the moment is right.
Buy the Dips
Trading Myth – The myth surrounding this is if a stock traded at $10 yesterday, it is worth buying today if you see that it is worth $9.
The majority of the time, this is not the case as a falling stock continues to fall. Sellers will follow suit as the stock continues to descend and traders try to cut their losses. When buying the dip, the most common experience is that you will follow these sellers contributing to a loss.
If you notice a stock that is ascending and rising in volume, it is a good idea to buy this stock. It may cost you more initially, but the growth will usually continue. Rising stocks usually attract more investors providing a good cushion from your original price point.
All or Nothing
Trading Myth – The only way you can make money is by risking it all. Put all or most of your money into a big trade and make yourself rich overnight if it pays off.
Never put all your money into a trade, especially if you find that there is risk surrounding it. Volatile trades and certain cryptocurrencies are strong reasons why a more cautious approach is viable. Building wealth takes time, so don’t expect to become a millionaire overnight. If you’re making high-risk trades, the chance of losing capital is much higher and can occur much quicker than becoming profitable.