Many first-time investors anticipate they will trade so easy, regardless of the asset being traded. Those who think trading will be easy often expect to trade small amounts and win big without understanding the principles of trading, compounding, or investing. Trading can have successful results, but having unrealistic expectations is a formula for failure and frustration.
How to Trade So Easy in the Real World
If you expect to trade so easy in the real world, you need to educate yourself before making that first investment. The fact is, no system can double your account size each month. If such a system were to exist, it most probably would not be shared by the creator.
It is easy to understand why some people have unrealistic expectations given the number of scams, schemes, and bogus claims that exist. Slick marketing campaigns touting hollow promises are plentiful. It is also easy to see why others think trading is not for them.
By the same token, despite recent investment opportunities to enter the markets at record lows many are hesitant. Reasons stem from an overall lack of trust in the market, to a lack of confidence in their own ability to invest wisely.
In this article, we examine some common investor trading myths to see how Trade So Easy news might help new investors adopt successful strategies to trade profitably by having realistic goals and expectations.
Trade So Easy By Analyzing These Myths
- All day traders fail, so don’t even try.
- The markets are rigged, so little guys can’t win.
- Trading is a zero-sum game, and someone has to lose.
- To trade is to gamble with your money.
- You cannot trade a small amount and earn big.
- Trading requires full-time attention.
Myth #1: All Day Traders Fail
The number one reason day traders fail is that they gamble vs. invest. This happens most often when traders do not understand the market they are trading. Greed kicks in when a trader gets lucky and causes them to not take profits when they should. This might be followed by a change in direction that can quickly turn into a loss. Day traders who learn to control their emotions, read market movements, and stop trading to take profits can be highly successful.
The ability to trade so easy will come with experience if the right steps to be successful are taken. New traders often fail to recognize that trading takes a good deal of time to learn, there is no salary, and their efforts will not generate enough profit to pay themselves for many months. Those that do understand this will practice trading while working elsewhere and hone their skills and knowledge of the market. The latter group is most likely to be successful.
Myth #2: The Markets are Rigged
The markets have never been completely free of intervention from the forces of either central banks, governments, or investors not playing fair. Every cycle will have some combination of greed, innovation, fear, excitement, or bad actors that run “pump and dump” schemes. There will always be those who become fabulously rich by selling shares at inflated prices to unsuspecting investors.
The increase of high-frequency trading and interest rate manipulation, the rise of passive investors, huge stock buyback programs, and central bank intervention make it hard to read the markets. While fundamentals matter over the very long-term, sentiment, trends, misplaced expectations, investor emotions, and pure guesses drive the markets short-term. Some think of them as nothing more than a casino, but savvy investors can still profit – and do.
Savvy investors use limit orders to avoid becoming a victim of the high-frequency trading hustles that lure investors into buying too high and selling too low. The price of an asset fluctuates, but if you target a price you want to sell at, enter a limit order for that price, and exercise patience – you cannot lose, you only profit.
Myth #3: Trading is a Zero-Sum Game
This premise assumes there is always one winner and one loser. What one trader profits has to be equal to what another loses. While this is true, when traders hold their positions, no one wins or loses. Unlike a poker game, trading is not a winner takes all deal. Not every trader considers liquidity, risk management, and other data to make the decision to buy or sell. If they did, then trading would be a zero-sum game because the competition would be equal.
Trades in the stock market are based on future expectations, and trades in the crypto market are based on price movement which is highly volatile. If some traders sell their stocks or their digital assets, that does not mean they are necessarily losers. It could mean they bought at a good price and have reached their goal. The buyer might end with a loss, but only if the price reverses and they fail to exit in profit. In such a case, both traders could easily be winners – no zero-sum game.
Myth #4: Trading is Gambling
Some traders are gambling without even knowing it, but if an investor actually knows what he’s doing then he is trading. Developing knowledge and controlling emotions to overcome the odds of losing is how a trader avoids becoming a gambler. Trading for excitement, power, or satisfaction is a sign of a gambler.
Successful traders have a methodical, systematic strategy designed to make them money. They will take losses, but they keep the damage small and learn from their mistakes. Those that have to win on every trade to the point where they fail to take losses when they should will not be consistently profitable. Holding a losing position after original entry conditions have changed or gone negative indicates a trader is gambling and no longer using a sound trading strategy.
How a trader operates and their long term goals reveal whether there is trading or gambling being done. There are similarities between the two, but one major difference is that trading will have some science, money management, and technical analysis behind it, whereas gambling will not.
Myth #5: Trading Small Will Not Payoff Big
This is a myth with some caveats. Many believe you must risk more to make more when the opposite is true. Traders that seek to risk less on each trade tend to make higher returns in the long run. How you trade the smaller amount is what makes the difference. Of course, you don’t buy $100 worth of an asset and let it ride, thinking this will pay off big. Instead, you use a combination of stop loss and profit target to maximize the potential of the amount you are risking on a trade.
Successful traders employ a good risk/reward ratio and set realistic profit targets. Stop losses and profit targets set for a trade based on outlandish expectations are useless and will always result in a loss. Risking a small amount using a favorable risk/reward ratio means 1% of your account can be risked, with an earning potential of 4% or more on a trade. Win 50% of your trades day after day, compound the gains, and the result will be a good return even on a small amount.
The key takeaway is that trading can generate short-term profits while investing can build wealth over time. If you withdraw gains from your small account initially, you will never realize the benefits of your investment. The thing to do is to add to the account whenever possible to increase the power of compounded earnings.
Many traders with small accounts forget to calculate the cost of trading fees, commissions, software, or service costs. If trade gains are small, they can easily be dwarfed by the cost of these unavoidable expenses.
Myth #6: Trading Must Occur Full-Time
There are different trading styles and the one chosen determines the amount of time that should be dedicated. Obviously it will be hard to employ a scalping trader strategy if you work a nine-to-five job. Most traders begin while employed elsewhere and remain part-time traders. Having another income stream can work in your favor since day traders are not guaranteed any salary and will surely experience losses. It is best to use your job to enable a trading career and provide the means to cover living expenses. There is another option, and that is to copy the trades of experts on specially designed platforms. This option allows the investor to benefit from those with experience by earning and learning at the same time.
Summary of How to Trade So Easy
In order to trade so easy, you don’t need any prerequisite skills, high-end computers, or a college degree. What you do need is a basic understanding of the asset market you want to trade, clearly defined goals, some startup capital, and realistic expectations. Few successful traders begin with more than persistence, a good work ethic, and the ability to be adaptive.