Stock trading is perhaps comparable to intelligence gathering. People think there is something smooth about being an intelligence agent like James Bond, but there is actually little truth to what Hollywood is painting about the profession.
The same can be said about stock traders. Most neophytes enter into the industry without or with little knowledge about what they are joining. That’s why some get easily discouraged and some experience the shock of their lives.
Here are 4 myths people actually believe about being a stock trader.
1. Traders Always Hit It Big
In one scene of Wolf of Wall Street, Matthew McConaughey’s character is seen as getting somebody to invest in a huge amount of Microsoft stock to the cheers of his colleagues, right before he invites Leonardo di Caprio to lunch.
That entire movies must have painted the most erroneous picture of stock brokering and trading. Yes, traders do hit it big sometimes but others have incurred more losses especially during the beginning of their career. Stock trading is, in fact, a science, not a “get rick quick” scheme; the real Wolf of Wall Street was jailed for perpetuating that myth to his own gains.
2. It’s Exciting Being a Stock Trader
Yes, there are moments of huge excitement when you’re a stock trader. A new stock may emerge with great potential, leading speculative traders to jump on the bandwagon and ride the price hike. However, most of the times, you’re busy looking at tools — most of which are automated — and news items to see if there’s anything worth taking action on.
It’s actually very routine once you get down to it. And people find routine to be boring.
3. If The Price Goes Up, It’s Worth a Buy
Many neophyte traders who attempt at shorting stocks make the mistake of buying at the slight increase in price. That’s actually one of the decisions that land you in a very bad trading position, and that means a lot of losses.
There’s always a reason for the price to go up. You must also time your actions right. If you must buy when the price is high, be sure to have a definite threshold for your exit position. Don’t be too greedy with your winnings, because you might end up holding on even when the price is plummeting,
4. Anyone Can Trade
Technically, anyone can become a trader. However, each person has a specific risk appetite so not all kinds of stocks or financial instruments can be for you. For instance, short-term or day trading is a fit for those who seek a thrill and are willing to cope with losses.
Know your risk appetite by consulting with a qualified financial broker before you enter into stock trading, so you’ll know what investments are ideal for your tolerance for losses and danger.
We hope exposing these four myths can help you decide whether or not stock trading is a path that’s right for you. Good luck.