What Are Popular Stock Trading Myths?

List of Myths and Facts with Answers You Should Know

There are many Myths about Stock Trading that Beginner Traders hear and believe. This is because they are new to trading and do not realize that what they have been told is not fact. This leads to unnecessary losses and chronic problems with their trading. Stock Trading Myths cause trading losses. Take this simple test to see whether you know which is a Fact and which is a Myth.

Stock Trading Myth or Fact Questions

  1. For every Stock Trade, aka transaction, someone makes money and someone loses money.
    Myth or Fact?
  1. The less time you hold a stock, the less risk you have in that trade.
    Myth or Fact?
  1. You need to trade often and keep your money in the Stock Market in order to make a living Trading Stocks.
    Myth or Fact?
  1. You should always use a Percentage Stop Loss.
    Myth or Fact?
  1. Market Makers take advantage of Retail Traders and cause losses and whipsaw trades.
    Myth or Fact?


Stock Trading Myth or Fact Answers

  1. Many new traders assume that someone loses money and someone makes money for each Stock Trade. However, that is not true. Most of the time during a Bull Market, both sides of the transaction make money. As an example, you may buy a stock on a Swing Trade that runs for 5 days and then sell the stock to close the trade.
    The buyer is not necessarily losing money even if the stock retraces. That buyer is often a Long-Term Investor, a Buy Side Institution using Dark Pools, a Professional Trader Selling Short, or a High Frequency Trader (HFT). All of those buyers had a different reason for buying the stock when you sold it.
  1. The shorter the hold time, the higher the risk for that trade. This is because you have less time for the stock to recover from a profit-taking retracement intraday, as an example.
    Many Beginner Traders make the mistake of believing that if they only hold a stock for a couple of minutes, they have lowered their risk. In reality, they have done just the opposite.

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Trade Wisely,

Martha Stokes CMT

Chartered Market Technician
Instructor & Developer of TechniTrader Stock & Option Courses

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