3 TOP TRADING MYTHS
I am in shock with what is circulating the internet at the moment.
I’m seeing more “self-righteous” brats (with a big following) who are showing off their cars, houses and fine-dining experiences that their parents have given them.
And now they trying to teach the methods of trading without them even having a slither of experience.
Without them ever having endured more than four months of downside (let alone 5 years of beginner experience) .
They’re right now in their mommy’s house, trying to be an influencer on something they read up on the internet and are just dishing it out to the more ignorant followers.
And as trading has become a more available and accessible method to endeavour, we are seeing more B###*&t being exposed to the people.
Thing is, they might have had a week of success.
They might have learnt big terms like “Convergence, Directional Movement index” and so on…
And they might have sparked their little brain cells with some economic factor to consider for the week.
But their short-term experience is now being used to teach others for “what they so called need to do to achieve long term success”.
In this article, I’m going to tackle a few trading myths to help enlighten your ideas on what trading is about.
These are not things that I have thumb sucked but have experienced and undergone for the last 20 years of being in the markets…
Let’s start…
#1: MYTH BUSTED:
Trading is a Get Rich Quick scheme
It’s absolutely true that trading can make you a substantial and consistent income over time.
And yet, most people trade as if they want to retire by tomorrow.
You need to not think of the short term, when starting a career as a trader.
Instead, you need to realise that it’s going to take a lot of:
-
Time
-
Dedication
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Discipline
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Self-finding
Before you ever remotely, see these kinds of results.
The markets are constantly changing. The algorithms, correlations, markets and the dynamics are always evolving and so you need to keep up with the changes along the way.
Before you think about the portfolio growth aspect to your trading, you first need to take time to learn who you are as a trader, how the strategies work (through different market environments), and you need to develop your methods, money management and frame of mind over time.
If you do want to speed up the learning curve without losing too much money, I’d suggest you find a mentor (with at least 15 years of experience) who can help guide you through the processes where you can also learn from their mistakes, wisdom and experience.
This will save you from losing a fortune, losing time in figuring it out and will guide you to the right path of consistent success.
#2: MYTH BUSTED:
Trading is gambling
Ok, there is a double edge sword to this myth.
On the one end, you are technically risking money and making a bet when ever you take a trade.
BUT, on the other hand you are not leaving your positions entirely up to chance.
You have elements to control with trading compared to with gambling.
You can control the markets you choose to trade, the proven strategy you follow, how much money you would like to risk and when you would like to exit a position.
With gambling games like slots and flipping a coin or playing the lotto, you’re leaving your financial fate completely up to chance and luck.
Where as with trading I would say it is more like strategic gambling (similar to Poker, Roulette or Black Jack), where you know what you’re doing and what kinds of outcomes you can expect.
Except you don’t have to worry about antis, other players trying to trick you and time restrictions during the day.
Trading has many more elements to control compared to gambling and even strategic gambling.
#3: MYTH BUSTED:
More I deposit into my trade, the more money I’ll make
It’s true in a sense that, the more you have in your portfolio – the more money you can make in the medium to long term.
It’s all down to compounding, which I’ve explained over the decades.
However, trading is a relative game.
It’s all down to percentages.
For instance, you should NEVER deposit more than 7% -10% of your portfolio in any one trade.
First, you’ll be allocating a large portion of your portfolio at risk – which is not a safe route for longevity.
And of the 7% or 10%, you should never RISK more than 2% of your portfolio in any one trade (where you place your stop loss).
You always want to have at least 60% to 80% of your money in your portfolio – in case you enter into losing streaks (drawdowns), in case the market environment becomes less conducive and to help with your mindset knowing you can stomach the open positions that are currently at risk.
So if you have a $10,000 portfolio and you risk 2% you know you’ll stand to lose only $200.
Similarly, if you have a $100,000 portfolio and you risk 2%, you’ll stand to lose only $2,000 per trade.
It’s all relative.
Stop thinking of the money and start thinking in percentages and you’ll have a chance with trading…
If you found this article helpful for your trading or you would like to share your thoughts, let me know by emailing timon@timonandmati.com.
Trade well, live free.
Timon Rossolimos
Founder, MATI Trader
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