These days, almost everyone has an opinion or insight to offer regarding online trading, considering that it has become so popular. Many people will also try to discourage you. However, Shay Benhamou states that with any new venture, there will always be a substantial amount of speculation and this possibility is higher in the case of online trading. As a matter of fact, there are a number of interesting myths that surround this industry and this can result in confusion. Shay Benhamou has highlighted and debunked some of them below:
Myth 1: The risks in online trading are higher than stock investment
The most important fact that Shay Benhamou highlights is that options were primarily created for reducing the risk of online trading and investments, not to increase it. Put it simply, options give traders or investors the chance to invest in the stock market with a very low amount of capital and this can significantly reduce the risks that are usually associated with a lump sum stock investment. You will have the same amount of risk in stock trading and online options trading if you don’t have appropriate knowledge or the right strategies.
Myth 2: Option trading was responsible for the stock market crash
The stock market crashed in 2008 and this resulted in a huge financial crisis. Many people have associated option trading with the crash, but Shay Benhamou clarifies that this is not the case. Leveraged products don’t cause crashes, but it is actually the misuse of the leverage that does. Options are a derivative, which means they allow for investment leverage. Any investment product that carries risks is mostly because of the amount of leverage it offers. The fact is that options is not the only derivative in the market; there are literally thousands of them. In 2008, bankers and traders took unnecessary risks with different derivative investments and this led to the crisis.
Myth 3: You require a lot of money for trading
If you want to be a successful trader or investor, you have to start from somewhere and this definitely doesn’t mean that you have to invest millions of dollars. According to Shay Benhamou, you just need $3,000 to begin with a trading margin account. This is enough for you to start with basic option strategies. No matter what financial pursuit it is, you should start out with a small amount of money, especially when you are learning trading strategies and becoming more confident.
Myth 4: Online trading is just for professionals
Before the launch of online retail trading platforms, online trading was truly reserved for professionals. But, Shay Benhamou asserts that it is no longer the case. Trading options were available to investors, but it was lack of supporting technology that stood in the way. Now that a number of online trading platforms can be found and technology is also made available to those interested, anyone can start online trading from the comfort of their home.
Myth 5: Online trading is a good way to make quick profits
One of the biggest myths that have always been associated with online trading is that it is a ‘get rich quick’ scheme. This is rooted in the constant sharing of news of people investing in the financial markets and making significant returns that would usually take them years to make through other investment vehicles. Yes, such situations do occur, but Shay Benhamou reminds that it is not very commonplace. Having a get rich quick attitude is not how you should approach online trading. It is not a way to solve your financial problems. Instead, you should consider it another tool that can come in handy for managing your finances.
Anyone trying to teach you online trading so you will be able to make a lot of money quickly should be regarded with suspicion because there are no guarantees and there will always be risks.