Trading myths debunked by our trading experts

Is Trading Gambling?

If you’re a relative newbie to the world of trading then you’re likely to be getting to grips with what CFD trading is. Putting aside the difference between CFDs and spread betting, you've probably heard many myths when it comes to trading, whether it's forex, commodities or something else. Many of which will include misconceptions that can put promising traders off making that first deposit into their trading accounts and giving it a go.

That’s why we’re here to dispel these trading myths and ease your fears about trading the financial markets. We’ve busted 17 trading myths to put you firmly in the picture.

What Do Our Experts Have to Say?

CMC Expert Name

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Ready to Test Your Knowledge?

“Using higher leverage means you will make greater profits.”

Is this true or false?

Swipe to find out.

True

By taking 10:1 leverage instead of 5:1 leverage, you can effectively double the value of your open position. Although this can double potential profits, it can also double potential losses too, so manage your risk accordingly.

“You need to be rich to start trading.”

Is this true or false?

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False

You don’t need tens of thousands of pounds to start trading. With no minimum deposit on spread betting and CFD trading accounts with CMC Markets, you can open positions to suit your trading bank. Meanwhile, leverage can maximise your positions without having to deposit the full value of your trade.

“What goes up must come down.”

Is this true or false?

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False

Although some traders will use technical analysis and historical data to predict future prices, there is no guarantee that the past influences the future. You cannot influence the market dynamics and they should be respected.

Other Popular Trading Myths

Hopefully, by acknowledging the most common trading myths below, you’ll be better placed to create a trading account and engage with the markets without preconceptions – freeing your mind to hone your trading strategies and find your niche.

FALSE

“Trading signals are not reliable.”

Using a state-of-the-art spread betting platform, you can find a suite of proven technical analysis tools that experienced traders still use today to inform their next moves.

FALSE

“The stock market is fixed against normal people.”

The financial markets do not discriminate. They are open to all retail traders. Ultimately, it’s about having the right trading and risk management strategies to cover all eventualities.

FALSE

“Trading can make you rich.”

Although it may be possible to generate a significant income from trading over time, we would never guarantee it. Is trading a good way to make money? Potentially, providing you know what you’re getting into and you protect your bank.

FALSE

“You need at least six monitors to trade efficiently.”

You can trade efficiently with just one monitor, although there is no harm in having more. There are retail traders that use our mobile trading apps to manage positions using on-the-go charting, as well as our web platform that’s ideal for single-screen desktops and laptops alike.

TRUE

“One of your biggest enemies is your emotions.”

As humans, we aren’t hard-wired to accept losses. Is trading risky because of our emotions? Absolutely. It reinforces the importance of a trading plan and developing a trading edge.

FALSE

“Trading is better than investing.”

The reality is that both can coexist together. Is trading a good career path? Potentially, but with trading, there is no guarantee of a return. While investing carries some risk, it may be suitable for those thinking in the long term, and can also offer passive income in the form of dividends. Simply put, you can do both.

TRUE

“Trading can be a full time job.”

It doesn’t matter whether you day trade or swing trade the markets, nothing is stopping you from making a full-time income from trading so long as you have an edge and a trading plan.

FALSE

“You get the best trading tips from TikTok and Reddit.”

It’s always best to get your trading advice and insights from regulated brokers and analysts that have your best interests at heart.

TRUE

“Most day traders lose over 60% of their money.”

The majority of day traders are not profitable. You may incur losses when trading in the financial markets. This is why it is important that you only trade with funds you are comfortable losing.

FALSE

“You have to have a degree in economics to trade successfully.”

Is trading complicated? Yes, it can be. However, you don’t need to have years of experience in macroeconomics to trade profitably. It’s important to identify your trading objectives and then decide on a trading edge and a plan that offers a profitable risk-reward ratio.

FALSE

“The stock market is dying because of cryptocurrency.”

Both equities and cryptocurrencies are capable of coexisting without one another’s demise. Both markets offer different things and appeal to different traders.

FALSE

“Successful traders never have days of bad performance.”

Profitable traders will have losing days, weeks, or even months. For them, it’s about removing the emotion and looking at the long-term picture.

FALSE

“Trading is pointless because of all the insider trading that goes on.”

Although insider trading exists, this doesn't necessarily mean that it's common. There are plenty of legitimate trading opportunities in the markets to get your teeth stuck into daily.

FALSE

“You can predict what the market will do.”

It’s impossible to predict what the markets will do with any certainty. However, technical analysis tools can provide an indicator as to where the market may head.

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Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when spread betting and/or trading CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.

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Myth

Busters.