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Smashing the myths and misconceptions about stock trading is important to me because I know some of these myths contribute to the high failure rate of new stock traders. Let’s dig in and look at some common myths and why they are just WRONG!

1. “Stock trading is only for the rich”

Not true! This would have been true if you started investing a few decades ago, but not any longer. In the past when placing a trade meant speaking on the phone to a full service stockbroker (do they even exist any more?!?), the brokerage fees to trade were much higher than they are today. I remember placing an overseas trade and having to pay $100 commission just because I had to speak to the broker. When we had to pay that much per trade, you really needed a lot more money to trade to make the commissions worth while!

Now that online discount brokers like Interactive Brokers allow you to trade exchanges all over the world in a single account for just a couple of dollars a trade, it is possible to make great returns starting with a small trading account balance.

2. “It is too late to start trading, I’m too old.”

True and false. It would depend on how you handled your portfolio and if you’ve gained or lost your stocks. There’s no ‘wrong time’ to invest in the markets… No matter if the market is moving down, up, or sideways, there is still money to be made with the right portfolio of stock trading systems . It’s never too late to get started!

The key decision now is to decide that you are going to succeed in the market so that in 10 years from now you WILL be a millionaire. Give yourself the best chance of achieving this goal by learning to trade stocks systematically.

3. “Stock trading is based on luck.”

This is probably true for 98% of uninformed traders who use indicators, gut feel, tips, newsletters, signal services and chat rooms to guide their trading decisions. Most of these things just don’t work and so using them you are basically just gambling… this means any successes you have had are in large part due to luck. I know this sounds harsh, but the reality is, unless you have 30 years of data showing that your approach is profitable, chances are you are reliant on luck and hope.

Hope is not a strategy… neither is relying on luck!

The best way to rise above this is to become a systematic trader. As systematic traders our stock trading is NOT based on luck. We use stock trading systems with rules, and backtesting software like Amibroker to validate our trading strategies to ensure they are profitable and stable over time. We don’t listen to media noise, tips or rumors… we base all our trading on our thoroughly backtested stock trading systems.

4. “You have to watch the market all day (and be a daytrader) to make money trading stocks.”

This is 100% FALSE! In fact the reality is that most daytraders actually lose money. There are so many reasons daytrading is a bad strategy. For me though it all comes down to a couple of key concepts. Firstly, the shorter timeframe you trade, the more noise there is in the market and the smaller the moves the market experiences in your timeframe. The high noise component combined with the cost of trading makes daytrading very challenging to make money. Longer timeframes like EOD trading on daily charts give you a much larger edge and therefore greater chance of success.

The second issue is the pressure on your trading psychology of looking at the markets all day is huge. The constant fluctuations and large amount of negative feedback make daytrading very stressful. When stress and emotions are high, your ability to make good trading decisions is low and you just won’t make money.

The final issue is the most important for me – Freedom! I started trading to get free of my day job, so I never wanted to spend all day looking at the computer screen trading. When I left the corporate world to trade full time in 2012 I loved having the time to spend with my family and do what I wanted because my trading only took me 30 minutes a day. I would never daytrade because it is just like having a job only more stressful!

5. Stock trading is complicated and is only for techie people.

False! Stock trading systems do require some level of coding to set up and test your rules, but this is absolutely learnable and I teach you everything you need to know in The Trader Success System! It is hard and there is a learning curve, but you don’t need to know how to do all of the techie stuff going in, you just need someone to teach you trading the right way so you don’t waste years learning the wrong things!

My programs already have profitable stock trading systems provided for my students so you don’t need to start from scratch in making a stock trading system. I encourage and teach you to customize the stock trading systems I provide in my course; adjusting them to your personality, objectives, and lifestyle.

If you have been holding off learning to trade stocks systematically because you think you need to be a tech genius then you are missing a huge opportunity – as long as you have a sense of adventure and are willing to learn and ask questions then you can succeed.

6. You have to stay updated with the latest news when trading stocks.

Wrong. The latest news does NOT affect your trading, we leave that noise to the discretionary traders who lose money. By the time you hear the news the market has already adjusted to it, so you will always be at a disadvantage compared to those closer to the action. Using stock trading systems to drive your decisions eliminates the need to stay up to date with every bit of news and in fact will generally keep you well ahead of the news because you are responding to movements in price which happen far more quickly than the flow of news.

When I turned off the news and decided to never watch it again (about 15 years ago now), my trading actually improved, my stress levels went down, I stopped bending and breaking my rules and basically everything about my trading got better!

7. You need to time the market and be good at picking highs and lows.

Wrong. Picking tops and bottoms consistently over time is IMPOSSIBLE and traders who try to do this inevitably lose money. You don’t need to pick the absolute top or bottom to make money, you just need a set of rules that will consistently get you in and out of the market with a positive edge. This is what a trading system will do for you.

8. “Trading is a man’s game.”

False! Seriously, it is 2022, do we really still have these sorts of beliefs in our society? It does not matter who you are, where you are from you can learn to be a successful private stock trader. Many of my best students are women, so there’s no advantage or benefit to either gender in the markets. As long as you’re willing to learn, you can become a successful stock trader.

9. “Stock trading is just a playground for scammers and you can’t actually win.”

Wrong. Compare learning to trade stocks to learning how to drive a car… First, you need to know the car’s functions, how to start the engine, how to use the brakes and gas pedals, how to park, and whatever road rules you need to know to keep you safe. After that, you’re good to go. Similarly with trading, you need to become familiar with the basics terms and how to’s of the market, and most importantly the rules which will keep you safe.

Signing up for a driving course is similar to signing up for a stock trading course; everything is provided to guide you step by step from beginner to advanced, and gain a real edge over other traders. This learning curve cannot be skipped – you must learn how to trade and how to protect your account if you want to trade stocks.

The problem comes when people try to take shortcuts – listening to scammers telling you “it is easy, just subscribe to my signals”, “just buy my bot”, “just use this broker that is better than yours”, “just give me your money and I’ll trade it for you”… all of these are the hallmarks of scammers. The people who get scammed are the people trying to avoid doing the actual work of learning to trade. If you want to trade, take control and learn, don’t take the easy way out… as soon as you learn properly you actually have a good chance of winning and building massive wealth!

10. “You’ll never go broke taking a profit.”

Wrong. Too many traders believe that if they take profits on their trades they can’t go wrong – this is a really dangerous belief because it sounds so logical. Surely if you take profits off the table and avoid them turning into a loss then you will do well in the long run right? WRONG!

As I explain in this post, when you take profits on your trades with a fixed profit target you cap the size of your winning trades, ensuring you only ever have small winning trades. In order to make money trading you need large winning trades and small losing trades… you need to let your profits run so your winning trades grow bigger so they can outweigh your losing trades.

Traders who espouse the belief that “you can’t go broke taking a profit” have missed the fact that trading is a math game. You need the maths of your trading decisions to work out profitable over many many trades. If you have small winners because you keep taking profits early then your loses will cause you problems and you will lose money.

Conclusion

Most of the myths we have discussed in this article are simply excuses traders make up to justify their own behavior. The common thread in all of these situations is that if you want to be a successful trader then you need to invest in your learning, put in the effort, not take shortcuts and stop justifying your emotional decisions.

The real key to doing all of these things is to learn to trade systematically so you can finally start making money and building the wealth you want from the stock market!

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