Trading can be a daunting endeavor for anyone, even without the added misconceptions and myths of the stock market. There are many reasons that people disregard the financial opportunities of trading, many of which are untrue. Today's guide will uncover the truth of many of these matters.
Shedding Light on Common Stock Market Myths
Many preconceptions swirl around trading in general. While some hold merit, many are fabricated myths. Like many industries in the world with a complex nature, it is common for people without a strong background or education in economics to be skeptical. That skepticism can lead to believing that some misleading trading myths are true.
The fear of loss alone can keep many people from beginning to trade; meanwhile, the added misconceptions stand to further discourage people from even taking the first steps of opening an account.
Myth 1: The Stock Market is Only for Professionals and the Wealthy
This stock market myth had rolled over from the past era of trading, before the doors to the age of information were opened by the digital access we have today. Olymp Trade offers access to global markets from the comfort of your home via a computer, and even in the palm of your hand with applications available on your cell phone or mobile device.
Beyond access, today’s traders have the opportunity to trade on these markets with little capital investment. This is possible more often when firms allow traders to trade on the underlying assets in various ways.
Firms are able to offer their clients equally inexpensive trading options, with the ability to open trades on the market for as little as $1. While a formal education on financial analysis and navigating the markets certainly is an advantage, the information available to today’s traders through the internet has opened opportunities for success to those willing to take the time to invest in themselves.
All of the strategies and tools these professionals use are given to you up front, and all of this information has never been easier to access. Educational material is routinely produced with articles and videos from professionals to give you the same advantage on the market. The idea that it still requires a large amount of capital or a background in finance to access or successfully navigate stocks, commodities, and currencies is a relic from a different era, debunking our first myth of stock market.
Myth 2: Trading is Gambling
Assessing the value of a potential company, commodity or other asset available on the market can be a complex endeavor full of seemingly random variables. There are so many of these variables involved that short-term price movements appear to be fully unpredictable, thus creating risk. However, over the long term, stocks have discernable trends that can be predicted with some accuracy.
In the short term, a company can survive by creating revenue regardless of whether it turns a profit because of the expectations of their future earnings. In time the long term the company’s stock price will reflect the true nature of the company's success.
Believe it or not, gambling is a stark departure from an investment. Gambling has a clear winner and losers because it is a game of chance. In many cases, companies that receive investments compete, grow, drive the economy, and ultimately add value globally. Investing to create wealth and prosperity for your family should never be confused or considered a form of gambling.
Myth 3: What Goes Up Must Come Down, What is Down Must Come Up
While this could be split into two separate myths of stock market, the train of thought is very similar and is a trap that many new investors believe is true. Whether you see a stock that has dropped to a yearly low that hovered in the upper echelons of the market, or a stock that has blasted through its ceiling in rapid succession, without strong indicators in your fundamental analysis there is no basis that a reversal will happen.
Investing in a company due to its value decreasing does not ensure that it will yield positive returns. Many new traders confuse this line of thinking with a "value investing strategy.” This strategy has many working variables that must be taken into account outside of price alone. When focusing on trading instead of investing, technical analysis will serve as a much stronger tool for success.
The opposite is also a trap, Newton’s First Law of Gravity does not apply to the market, this isn’t to say that corrections are infrequent, but we must remember that companies across the markets have many factors that cdetermine their growth and just like a well-kept vehicle, there is no reason for a break down when a business is being tended to correctly.
Perhaps you are someone who believed you didn't have the financial resources to join the market and take advantage of life-changing opportunities. Thankfully this isn't true and you can join today. Don’t be frustrated anymore, there are options for you on Olymp Trade. Maybe you've been led to believe the market is too complex for someone without a background in finance to succeed. The Official Olymp Trade blog has you covered with all the educational resources you could need and more.
Hopefully today these misconceptions have been dispelled for good and you are encouraged to give Olymp Trade a try.