True/False – Common Myths About The Stock Market – Myth #2

In the past 12 years of investing and trading in the stock market, I have learned a lot from my conversations with other women. For one, I have discovered many misconceptions about the stock market. In the interest of personal growth, I am open to learning new things.  So, once I’ve discovered that what I used to think about a particular topic is based on insufficient information, I find myself opening up to a new perspective.

 

So, how do some women allow their mind to take them out of the financial game? Well, while our mind can be extremely powerful, its desire for security and resistance to change can also keep us from stepping out of the box to accomplish our goals and dreams.

 

Stock Market Myth #2
It takes a lot of money to start investing.

 

I hear this one a lot. Many ladies believe that it takes several thousands of dollars to begin investing or trading in the stock market. “It takes money to make money” is a common saying most of us have heard before. Truth be told, you can get started purchasing stocks and even trading stock options for $500 or less. There are resources you can use to get started analyzing stocks for FREE. I will also show you an online broker website where you can trade and invest for minimal commissions and NO required minimum account balances. I know this because this is how I got started.

 

In my last post “Stock Market Myth #1” I mentioned the importance of trading and investing based on a systematic approach. One of the great things about the systematic approach that I began using seven years ago is that I was able to test it out without any financial commitment. How? I used paper trading. When I first learned about this system from my mentor I was skeptical. Skepticism is healthy. I don’t take anyone else’s word for anything, even though my mentor had been trading and investing in the stock market for over 20 years. I want to see for myself that what they are saying is true. Paper trading allowed me to do this. I recorded the stock price at my entry and exit points, along with my profit (or loss) at my exit point. And once I consistently had 7 out of 10 profitable trades, I started using my own money.

 

 

 

 

 

 

 

 

Comments

[tturner]

Paper trading... Interesting. So many times, investors throw money in a stock and hope and pray that it goes up. I like the idea of testing the system (7/10 times profitable) before actually trading with money. Question: What is the timetable to determine if the approach is profitable?

[Aneshia]

Hi tturner, thanks so much for your response. To answer your question, the timetable ultimately depends on your goals. It is imperative to know not only what your profit goal is but also what you are willing to risk before cutting your losses. And I stress the importance of knowing this information BEFORE you enter the trade. This is part of the systematic approach that you follow in a disciplined manner so that your emotions do not get the best of you. As I mentioned in Stock Market Myth #3, there is no such system that guarantees profitable trades everytime.

I measure my profit goal and risk in percent. I know that I am not willing to lose (risk) more than 20% on an investment. So at any time when the security (stock or ETF) drops below 20%, I sell it to protect the rest of my investment capital. I have more of a long-term approach to most of my investments. So, once I hit my profit goal, I implement what is known as a "trailing stop." I let my profits run, i.e. continue to increase after I have hit my goal, but a trailing stop of 10% will automatically sell my stock (or ETF) if the price drops 10% from its high.