Trading: Myths and Truths


The meaning of the word truth ranges from honesty, good faith, and human sincerity in general, to the agreement of knowledge with things that are affirmed as realities. In this article, you will find some reflections and tips to improve our trading every day.

In simple terms, it means to trust and fidelity. Things are true when they are trustworthy, and faithful because they fulfill what they offer. Furthermore, the term does not have a single definition that most scholars agree with, and theories of truth continue to be the subject of much debate.

In the financial markets, we always hear about half-truths, incomplete information, and other factors to which we attribute our successes or failures as traders. However, we can say with certainty that in trading there are only two emotions: fear or greed.

According to the Royal Academy of the Language, a model is an archetype or point of reference to imitate or follow. This is how in the financial markets some people become an ideal of what we want to become, to the point that sometimes we don’t even look at what they tell us, only what they represent.

Phrases of Some Famous People To Ponder

ANDRE  KOSTOLANY

  • “If there are more fools than paper in the market, the stock market goes up. If there is more paper than fools, the stock market goes down.”
  • “It is not necessary to believe that when others massively buy some shares, they know more or are better informed. Its causes can be so different that it is practically impossible to draw consequences from them.
  • “The most useful words in the stock market are: perhaps, as expected, possibly, could be, however, despite, certainly, I believe, but, and its possibilities.

PETER  LYNCH

  • “I don’t know if the next 1,000 points of the Dow Jones will be up or down, but I’m sure the next 10,000 will be up.”
  • “An investor’s destiny is determined by his stomach, not his brain.”
  • “Don’t follow in my footsteps because even if I am right when I buy, you won’t know when I sell”.

WARREN  BUFFET

  • “Much of the success can be attributed to inactivity. Most investors cannot resist the temptation to constantly buy and sell”
  • “Broad diversification is only necessary when the investor doesn’t understand what he is doing”
  • “If markets were efficient, I’d be begging for charity on the street”
  • “Unless you can see your stocks drop 50% without having a panic attack, you shouldn’t invest in the stock market.”
  • “You are neither right nor wrong because the crowd disagrees with you, you are right because your data and reasoning are correct”
  • “Never invest in businesses that you cannot understand.”
  • “Don’t try to predict the direction of the stock market, the economy, interest rates, or elections.”

In the world’s financial markets we always hear about risk and its impact on our operations. What we do not forget is that these two variables depend only on ourselves.

Mark Twain said, “October is one of the particularly dangerous months for stock market speculation. The other dangerous months are July, January, September, April, November, May, March, June, December, August, and February”

New Trading Concepts

The trading system that works for me is the one that suits my needs. I must always know how much time per day I am going to dedicate to trading. Likewise, I must know what time frame I can handle in each trade and what risk model I am going to follow.

It is very important, to be honest with the knowledge we have of the market. If we need to, we should study more and learn about those things we don’t know about the financial markets. The trading model I am going to follow must be designed by myself. The process to operate in the market has some steps to follow:

  • Decide which trading system I am going to use and study it carefully.
  • Know it 100% and know when to win and when to lose according to the analysis tools I chose.
  • To apply my knowledge initially in a demo account. For this, I must choose a good broker. In AtoZ Markets we have a list of great brokers that you can consult.
  • I should always keep a statistic of my trades measured in % profit and loss every day.
  • I should try to find places or trading groups similar to my way of trading.
  • Whenever I hear a financial term in the market that I don’t understand I should go and study what it is.
  • I should keep myself updated on the main news happening in the financial markets of the world.

Improve Your Trading Psychology and Your Returns Will Improve

Don’t pretend to be one trader by imitating another. We are unique as people and as traders. Every trader must first understand what they are afraid of and why? Reflect on these issues ahead of time so you can quickly identify the problem and find a solution. Your focus should be to not let the fear of loss refrain you from making a profit. Before you enter a trade, define your stop-loss and profit levels to avoid being swayed by greed.

Good trading psychology occurs when you are happy with your profits and do not chase irrational profits.

Ask, listen and apply.

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