The stock market has become a very popular place that is supposed to help you grow your money. And just like anything else there are a lot of common misconceptions that emerge with it. Here are just a few to look out for.
1. You Need to Be a Genus to Trade Stocks
Most people believe that in order for you to be successful trading the stock market you have to have an IQ in the 160+ range. That isn’t true, there is very little in this world that the average man cannot accomplish.
Anyone who want to trade stocks and puts the effort into learning can pick it up and get very good at it. IQ is not a good determiner of how far you will go in life, rather your determination and vision are.
2. You Need to Watch the News and Find Out As Much As You Can First
Another thing that is often misunderstood is how much you need to actually know about a company before investing into it. You do not need to know everything about the company and watch the news 15 hours a day in order to be successful. Well first of all that is kind of impossible.
Second there are a ton of misguided rumors about the company that are not true, but still may make it around as facts. So one one end of the spectrum you have people running around in circles trying to make sense of all these rumors that they have heard and on the other you have people who make money in the market while ignoring 99% of all news and rumors that come out.
Successful traders instead create their own system of rules and then follow it. This way they know that it works and do not have to analyses random data and rumors and try to make sense of it all.
3. Buy Low Sell High
Buy low sell high is an interesting concept. But it does not classify what is low and what is high. It also fails to mention that stocks tend to trend. So, if a $50 stock drops to $40 it may be low, but it will probably continue to drop until some major event turns it around. It may not turn around until it is at $15. Everyone who bought at $40 would have to wait years before they can even break even, and that is if they do break even.
On the other hand you can make money buy buying stocks high; you just need to sell them higher.