Stock Market Myths About Short Term Trading

1. Speculators don’t make money when the market goes down. Actually, unlike long term investors who get hurt by market crashes short term traders can take full advantage of downturns in the market by shorting the stock or buying puts. I don’t know where this myth came from considering most if not all short term traders do not mind playing the downside. And short term trading is the best way to protect your account from down cycles in the market.

2. Short term trading is risky. Anytime you put your money in the market you are taking a risk, regardless of what your time frame is. Some people seem to have forgotten that buy and hold or investing in big named companies is not always a for sure thing.

3. Speculators can’t beat the market. It is very possible to make between 20-100% annualized returns, sometimes even more, in the market as a short term speculator. If that isn’t beating the market we should all be rich.

4. Speculators can make money in the short run, but investors will make money in the long run. This comes from the belief that long term traders have that they will make money in the long run if they buy strong value companies. While this has been shown to work in the past you can’t assume just because it works, it works better then trading. Pulling out relatively consistent small gains adds up.

5. Short Term Traders sit at their computers all day and watch the market. This is totally false, if you are a position trader you do not want to spend more then 5-20 minutes a day (after hours) monitoring your positions, any more is just stressful and not worth it. If you are a day trader you probably want to spend more time, like 30-90 minutes. It probably takes just as much time to research good value companies as it does to maintain a strong trading account.

6. You Can’t Make a Living By trading. Considering there are many people alive today who do just that, this myth was pretty much debunked once it was stated.