trading myths and realities

1. Holy Grail

Every system is unique and every system has it’s strengths or weaknesses. No one system is perfect or is able to win all the time – especially as market condition changes. A system may perform very well in one market condition but will have drawdowns during other market conditions. That is another reason why there is no such thing as a Holy Grail system.

However, a Trader could have a Trading Edge. An Edge is a unique skill set possessed by the individual Trader that gives him/her superiority over the market. Using his/her edge, the individual trader is able to overcome a system’s weakness and leverage on it’s strength. This means the trader is able to execute the system without trouble and, hence, making consistent and profitable trades as expected from the system.

 

2. It’s Easy to Learn Trading on My Own

It has been proven that as many as 95% of traders fail to be profitable. Many of these traders do not invest in trading education. Also, they do not have a trading mentor who is there to guide them when things go wrong. Trading is simple but human are prone to make mistakes. Hence, having a Trading Mentor is crucial for your trading success.

I will be lying if I said that it’s impossible to learn to trade on your own. However, the real problem is not able being able to learn on your own or not, but it’s about managing the learning on the longer term with little or not support.

On the other hand.. Yes, there are lots of free information on the internet. However, the real problem is not the lack of information on the web, most beginners get information over-load and they end up getting really confuse. Hence, it is wiser to get professional help and not let your ego take control.

 

3. You need to know Everything

The financial market is a big and complicated market place. Hence, learning is a never ending process. However, some retail traders have a professional upbringing and have a tendency to be a perfectionist. That’s absolutely fine except that you really don’t need to learn everything to be a great trader.

Nonetheless, it is vital that you need to know everything about your trading edge. A trading edge is something that gives you an advantage over the market.

This is inline with Point 5. below.

 

trading no blames

4. When I lose Money, it is the Market’s fault

Unfortunately, the financial market presents to us opportunities that are equal and similar to everyone. Using that as the basis, the market is actually fair to all the traders who trade it.

If that’s the case, then it is by no means the markets fault if you are the one decides to enter the market.

In fact, it is probably due to the lack of experience or knowledge that causes a trader to lose beyond the expected parameters of your system.

This is inline with Point 9. below.

 

5. Fundamental, Sentiment or Technical

Essentially, these are the 3 major types of trading analysis. They say the best traders are those who master all of them. However, I’ve also seen many traders who only stick to one of the above.

With that, I strongly advise novice traders to keep only to one of the above – at least in the beginning. You can become a profitable as long as you master just one of the above. Don’t become a Jake of all trades but Master of None.

6. I need to be in Multiple Markets

I can see and understand the need to be trading multiple markets. However, as the saying goes, all you need is one profitable system to be profitable. In laymen terms, it means that one system in one market is actually sufficient as long as it’s profitable.

There is no hard and fix rules to the number of systems you should or can have and the truth is, it’s really down to you as an individual. However, please do not start off your trading career on multiple markets.

 

7. I need to be at the Charts All the Time

Trading All the TimeYou don’t need to be at the charts ALL the time. Many traders get confused between being at the charts at the right time and being there all the time.

It’s true that many traders start learning the markets by observing the market constantly. From a learning point of view, that’s a good attitude to have. You’re pretty much trying to understand the behaviour of the market and, in due course, you’ll learning to filter the market hours that are useless to you trading system.

There are many ways to trade the Financial Market. Some Traders choose to be constantly in the market and some Traders choose not to. Nonetheless, these two type of Traders can be equally profitable. Some Pro traders only take about 3-6 trades a month. They probably have open trades but they are not watching the market that often.

I’ve also met traders who spend between 30 min to 4 hours per day trading. I believe that is a reasonable amount of time required by professionals and still be profitable.

 

8. 90% of Trading is about the System

The act of buying and selling in the financial market is in fact only 30% of Trading.

The rest of the time is spent on managing trades, analysis of the market, money management and risk management.

 

9. Pro Traders Win ALL the Time

Winning Trades All the TimeThere will always be someone out there claiming to be the BEST Trader with the BEST system. However, Trading is not about Winning all the time. Every trader has a niche (also known as a Trader’s Edge) and the ability to trade the niche is based on each individual’s personality and psychology.

Nonetheless, the truth is that experts can provide you with advice and direction. Everyone needs guidance during the initial stages of trading. Experts do provide good tips or guidance but you too need to follow the market conditions, build your own beliefs and invest or trade as per your own experience.

Here, we strongly encourage traders to find their Edge and then execute it with confidence.

 

10. Only the rich can afford to Trade Forex

Since Forex trading involves selling and buying foreign currencies and dealing in them, only the rich can afford such trading. This was true a few decades back.

Since the Forex market is a very liquid market, there are many brokers who are willing to provide brokerage to Traders with smaller accounts. The smallest trade-able amount is a Micro Lot (per pip) – this is an equivalent of USD$0.10. Of course, pending on the system, a trade set up may require a Stop Loss size between 20-200 pips.

In short, you can start trading with as little as USD 300.

 

11. Trading is a form of Gambling.

The word “Gamble” is quite a misleading term. People often use it very loosely and they associate it with anything that involves a Bet. The truth being, crossing a street requires the pedestrian to Bet his way across it in the hope that there will be no vehicles while he is crossing. Is that a gamble?

So, to be clear, one would normally only associate “Gambling” with high-risk and low-reward activities. In our view, this is really down to the individual’s appetite towards risk. If a person was to cross a very busy street in a hurry without much precaution, that could easily be categorised as Gambling too.

Since Risk Management is a key element of trading, Professional Traders generally apply rigid systems that have low-risk when trading the Financial Market. The system may only win 50% of the time but their winners are generally profitable enough to cover more than their losses. With that, Professional Traders are not considered Gamblers.

 

12. Forex Trading is the quickest way to get rich.

Every now and then there are advertisements that attract people to Forex trading. These advertisements have given rise to the myth that Forex trading is the quickest and easiest way to get rich.

There is no doubt that, if successful, Forex Trading is a great tool to grow wealth. However, this is true only if the Trader has the right support, education and commitment. More importantly, the Trader needs to have the right attitude. Learning how to trade the Financial Market requires a lot of patience and consistency. Hence this myth is only correct if the correct formula is applied.

 

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