Misconception and assumption plague every industry and job title. Until you do the work yourself or hear from someone who does, you might not even realize that what you think you know about a profession is misguided. No exception to the rule, there are plenty of unfounded beliefs about day trading perpetuated by those who don’t really understand it.
Unfortunately, these misconceptions can often deter people away from day trading or cause them to make mistakes as they try to prosper in the field. Let’s clear up some of the most common myths about day trading, so you can enter the industry with the right knowledge and understanding you need to succeed!
Myth: You’ll either get rich quick or fail trying.
A lot of people want to try their hand at day trading because they think all it takes is a few moves on the stock market to line your pockets. Others think day trading is too good to be true and that the market is far too unpredictable to time trades accurately. The truth is, you can get rich day trading, but there is no guarantee.
If you devote yourself to learning the ins and outs, studying market patterns, and working at it consistently, you can make a pretty good living as a trader. Still, it usually takes at least six months to a year to see a profit. Ultimately, it just depends on how much time, money, and energy you’re willing to commit to it. There is no reward without hard work and a little risk.
Myth: Day trading requires no training or strategy.
Another common misconception people hold about day trading is that it’s essentially the same thing as gambling, but with the stock market. While you can certainly take that approach and make random trades, a successful day trader is strategic in their moves and well-informed about the market.
The more you educate yourself about trading and reading the stock market, the better you’ll be at designing and sticking to an effective trading plan. Day trading is about making a series of calculated moves based on objective data. To be able to best interpret that data to calculate the best move and optimize your trading profit, you need to train, study, and practice like you would at any other job.
Myth: There is one crowning strategy that guarantees success.
On the other hand, some people go into day trading with the fantastical idea that there’s one foolproof strategy out there to discover that will always result in a profit. As great as that would be, it’s simply not realistic.
Another important aspect of day trading successfully is being able to understand and accept failure—no one wins on every trade. You need to be able to adjust your approach as the market changes and accept when it’s time to let go of a losing trade. If you stubbornly stick with one strategy, convinced you’ll eventually come out on top, your inflexibility will end up costing you more than you needed to lose.
Myth: You need a lot of money to start day trading.
When some people picture day trading, they think of rich Wall Street executives who have nothing but money to burn. But the great thing about day trading is that it’s accessible to anyone who wants to try it! It doesn’t matter how much money you start trading with, so much as what you do with it.
Yes, trading with less cushion is riskier, but you can profit just as much on a smaller amount if you use it wisely. Your trading wealth may grow at a slower pace when you start with less, but that doesn’t mean it can’t grow exponentially and consistently if you’re making smart moves.
Another common myth that both new and experienced day traders often believe? That you have to handle your trading taxes by yourself! With trader tax services from Trader’s Accounting, you don’t have to worry about tax strategy, bookkeeping, liability risk, wealth preservation, or even filing. We’ll take care of all of that for you, while you focus on mastering your market moves.
Give us a call at 800-938-9513 to get started!