Myths in trading


Never judge a trading system based on the winrate alone!

By Investopedia Staff Updated Aug 1, Many investors wonder whether they should invest in stocks. Before deciding to invest, it's important to have an accurate understanding of stocks and trading rather than blindly accepting common myths. Here are five of those myths and the truth behind them.

The choice of your time-frames is a very personal matter. If your strengths are geared around fast execution and emotional stability, lower time-frames might be more lucrative.

You have to find what works for you and audit yourself.

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Believing those myths and following generalizations usually always leads to bad trading. You have to find out for yourself what is working for you. Traders who trade trading accounts that are too small often adopt bad trading behavior, become undisciplined and are more likely to engage in gambling-like trading.

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It is very hard to unlearn those unhealthy patterns later on. The only thing that you can control about your trade is the risk and how much you are going to lose — this is done by setting a stop loss and correct position sizing.

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However, you have no control over the potential outcome. A large reward-risk myths in trading does not say anything about the trade itself and if the trade does not meet your criteria, all you are doing is entering a bad trade that has a higher probability of losing — regardless of the potentially large payout.

Some of these myths have arisen due to the way things used to be in the forex market before online forex trading became available to retail traders. Others probably arose as exaggerations based on specific cases that were in no way representative of the forex market as a whole. Still other misconceptions seem to have come about due to misunderstandings of basic forex market principles and practices among those less educated in this area. Download the short printable PDF version summarizing the key points of this lesson…. Click Here to Download In this article, we intend on debunking some forex myths that seem to have become rather popular, especially among retail traders who lack the benefit of professional or academic training.

Becoming better at anything is not achieved by performing the act itself, but throughout practice, preparation and analysis. A soccer player does not become a better player during the 90 minutes he plays each weekend and a tennis player does not improve his skills during the few sets he plays against an opponent.

What does Rakesh Jhunjhunwala have to say about intraday trading?

Indicators do not provide buy or sell signals. Indicators only take the price information you see on your charts, perform calculations and then visualize the results.