10 Common Stockmarket Myths To Avoid

1. Stock market is a form of gambling. Someone must lose in order for someone to gain - As a matter of fact, it is possible that everyone gains without the need for someone to lose (in real terms). How is that possible? In a bull market, it is possible that different investors buying into a common share at a different time make money. It is only the "economic" (not real doll loss) loss that an investor suffers as a result of selling the stock early.

2. Buy a stock when there is large buying volume sitting in the order transaction queue, as if there were many buyers waiting to buy the particular stock. - Very often this could well be the play of syndicates, to entice investors to buy the stocks when in fact they were looking to sell! For all you know, the buyer order could well evaporate all of a sudden! Sometimes, it could also well be an act of institution investor to provide support to the share price.

3. Buy when the share price has achieved higher highs on multiple consecutive days -
Quite often the particular stock with such pattern of trade may well be a sign of overbought position. A correction could be on its way!

4. Buy on news. - Very often investors already started accumulating the stock upon anticipation of a major event that will significantly enhance earnings of a company ahead of time. So instead, a better approach would be buy on "rumours", sell on "news or fact"! However, there are exceptions to this rule, such as if the market has not anticipated such event from happening.

5. Buy the Top 10 or 20 most active stocks, that is, follow the herd's mentality and buy when the particular stock is hotly traded. More often than not, you could well be buying a stock at a high price when the other wise investors were selling. Buying at a high price merely put yourself in a high risk position for potentially a smaller gain!

6. buy or sell with a view of short-term gain. Most people like making QUICK money, so that one does not "tie down" his or her funds. - I know the day traders and technical chartist will disagree with this. The fact of the matter is that unless you are a full-time trader, it will be difficult to monitor your stocks on an active manner. Moreover, doing short-term trading merely increases your cost of transactions over time!

7. Buy a stock when a key businessman or politician is buying the stock, as there must be some positive development going on. - This is pure speculation. Prices could well go the opposite way if the speculated event does not materialize. Moreover, a significant event may take a long time to materialize.

8. Holding on to stocks with the false believes that stock prices will ultimately revert to where they were once upon a time. - Never be afraid to cut losses as you could reinvest the money elsewhere with better returns. Be bold to admit your mistakes (After all, everyone does make mistakes). Holding on to stocks with poor fundamentals may well cause you to suffer significant losses! It is utmost important to understand a company's fundamentals before investing. Merely guided by rumours or tips is a risky business!

9. Only insiders can make money in stock market. - Fact of the matter is, you do not need to be an insider to make money. In fact, insider trading is illegal in most markets. You can make money by investing in fundamentally sound stocks. Value the business of a stock in the form of potential growth and management capability.

10. Stock market prediction is the key to successful investing. - Fact of the matter is, no one can accurately predict the movement of a stock, not even the most experience technical chartist! Technical analysis merely serve as a guidance, based on sophisticated software that can churn out predictions based on historical data and complex algorithms that no lay man can understand. Fact is, software is a program written by humans to best reflect patterns but never human behaviour which can be unpredicted, due to various circumstances such as fears due to uncertainty.