Many investors keep their distance from the world of stocks, and for a good reason. After all, the risks are significant.
But with its apparent similarity to gambling, the allure, the mystery, and the potential for quick gains continue to draw people in.
Naturally, anything with this level of appeal and possibility for reward is going to be shrouded in misconceptions.
Here, we will discuss some of the most common misconceptions about stock trading. Then, we’ll offer an alternative, one that is working well for many new stock traders.
5 Common Stock Trading Myths to Look Out For
The following myths have two damaging effects. First, they draw people into stock trading when they aren’t ready. Second, many people who might succeed in trading stocks stay away due to exaggerated fears.
- Stock Trading is Gambling
There may be some truth to this. After all, there is an element of risk to stock trading and risk is the essence of gambling.
But in reality, trading stocks is not about taking on unnecessary risk. It’s about doing deep research on a company, its competition, and the market it works within to develop real intelligence on the future value of a stock.
Investors can go astray when they turn to superstition and poor advice. But the best traders only deal in solid data and real information. What’s more, solid data is more accessible than ever.
- Stock Trading is too Exclusive
As the Gamestop incident has proven, you do not need to be a stock insider with elite connections to earn worthwhile gains by trading stocks.
While connections and a little luck do go a long way, who you are is not as important as what you know. This is why dramatic changes to the stock market are commensurate with the total growth of online activity. The more people who access valuable stock data, the more accessible that data becomes.
- Always Buy Low
It’s easy to understand why people follow this simple logic. After all, the most common adage about stocks is that you should buy low and sell high.
But in reality, sometimes stocks are low because the company is not competitive enough to raise its stock value.
So, should you buy low? Yes, you should.
But you should buy low when that low price is paired with actionable intelligence that indicates it will go up in value.
- High Prices Will Drop
This is the inverse of the last myth, and it is equally wrong.
The future value of a stock is always tied to the ability of the company itself to earn money. Just as a low stock price can indicate a failure to compete, so too can a high price reflect growth potential.
Both extremes of the “buy-low, sell-high” fallacy are dangerous if you follow them blindly. No matter how you look at stick prices, your decisions should be based on real data, not popular slogans.
- Trading Apps are Just a Passing Trend
There are many new resources available online that give you more power to trade successfully than ever before.
Certainly, there are some apps out there that are best avoided. But there are a number of highly rated demo trading apps that leverage the power of the Internet to bring you better data, better advice, and more intel on a company and its stock than ever before.
In reality, stock trading has become a more viable way to make money because of demo trading apps, and good trading apps are one of the most important drivers of this trend.
In the final analysis, stock trading is known to come with inherent risks.
The first among them is the many common myths that lead people astray. But the biggest problem is that there is no one to help innocent investors.
In this scenario, gaining more knowledge and insight into the stock market can prove to be very useful for new investors, so that they don’t end up making the wrong investment decision.