There are so many myths about the stock market, and if you fall into some of them, there is a risk of making major errors and plunging into losses. The truth about the stock market is that it is highly risky, meaning that the danger of losing your money always looms. However, you can be successful like the renowned traders if you have a good strategy and avoid common myths. Keep reading to understand some of these myths and how to invest in USA 500 and Tech 100 stock successfully.
#1: Investing in Stocks is Similar to Gambling
This is perhaps the commonest myth mainly peddled by people who are not conversant with the stock market. Lack of this understanding makes them believe that stock markets are unpredictable, random, and dangerous. Well, this definition fits gambling but cannot be used on stocks.
The reality about the stock market is that it is the opposite of gambling. As opposed to being a random game of change, you can use various strategies to understand and predict the movement of stocks. For example, the trend of a stock’s price changes when it reaches the level of support or resistance. However, there is a probability of the price breaking out if you notice a build-up in volume (consolidation) when approaching the level of resistance.
So, do not be cheated that the market is unpredictable. The only thing you need is a good strategy. If you are new in the stock market, consider practicing with the selected strategy to increase the chances of success.
#2: It is Impossible to Beat the Market
This is another misconception that a lot of people, especially those who execute their strategies incorrectly, make. However, you need to differentiate between the terms “challenging” and “impossible.”
If you want to beat the market, it does not come easily. Instead, you require comprehensive research, discipline, and a lot of patience. The good thing about stocks is that there are dozens of analyses by experts, making it easy to determine the possible movement of the selected stock’s price. Therefore, make sure to follow these analyses and combine them with personal due diligence before opening positions. Remember that even after opening the positions, you will still need stop-loss orders to help protect your capital.
#3: Stock Trading is Too Complex for Average Investors
While it is true that a lot of average traders make huge mistakes that result in losses, the argument that it is too complex is not true. That professional trader who is relied on by a large financial institution was at some point a novice and managed to amass more skills. So, every trader, from a new entrant to standard ones, can trade successfully by committing to learn.
Think of a situation like this. Instead of simply jumping into trading USA 500 or Tech 100 with real cash, why not take some moment to think about a good strategy. For example, you might want to test with different methods, from day trading to position trading before selecting the preferred one. Furthermore, you should start by trading the selected stocks using a virtual account. This will give you confidence that it is possible to make positive returns even after shifting to trading with cash.
#4: You Cannot Invest Unless You have a lot of Money
This myth tries to push through the argument that trading stocks is a reserve for the rich, which is absolutely false. Today, the digital world platforms have revolutionized trading, and it is possible to even get started with as low as $1 in some index funds or purchase own stock portfolio with only $1,000.
We have to agree that there are some USA 500 stocks that have very high prices, meaning that they might not be desirable for investors with cash limitations. However, you can start with the amount at hand, grow it, and invest in these stocks later. So, do not be scared away from trading stocks by this cheap myth. Visit capex.com to see different financial instruments that you can trade with varying amounts of capital.
#5: Brokerage Fee Eats Away All Profits
This statement might have been somehow true in the past when brokerages used to charge as much as $30 to allow people to trade in their platforms to buy and sell stock worth $100. However, the modern platforms have made brokers to create highly effective platforms at lower costs, which mean lower charges for traders.
Today, most brokers have pushed down the transaction charges to about $1-$7, which we think is a good rate, especially if you are trading with a decent amount. Indeed, you might find some traders with zero transaction fees. Remember that in addition to checking the transaction charges, you also need to ensure that the selected broker has an impressive trading platform, multiple trading instruments, and good customer support.
#6: You are Automatically Invested after Opening an Account
This is another myth that can easily ground you before making the first trade. Sure, you need to start by selecting an appropriate broker, open an account, and deposit some cash. However, this is not enough!
You still need to take the next step of selecting the preferred financial instrument by opening a position. For example, if you have deposited $20,000 at capex.com, you have to decide the USA 500 stock to trade, select a preferred strategy, and open a position. Also, you need to use an appropriate risk management strategy, such as a stop-loss order to keep the level of loss low in the event that the price moves against your prediction.
If you are a new trader, the myths we have listed in this post can be a huge stumbling block, making you see impossibilities everywhere. The good news is that you can also become a professional trader by committing to progressively learn about the stock market. So, make sure to start with the basics, practice taking orders, and optimizing returns with a virtual account before commencing trade with real cash. Even when you make some losses, do not give up because that can be an awesome learning opportunity.