Forex is the world’s fastest growing market. It attracts thousands of new players daily. However, such widespread popularity can be a double-edged sword. Various rumors and false narratives mislead beginners and hinder successful trading. In fact, the majority of these tales are not true. In this lesson, we will disclose the top 10 most common myths about the forex market.
Myth 1: Trading in Forex is easy
At the first glance, traders’ technical manipulations seem to be simple. Anyone can install a trading platform or choose a trading strategy and instruments. Setting Stop Loss and Take Profit orders seems also like a piece of cake. However, this is a popular misconception. Trading requires constant and considerable effort. Success in Forex depends not only on your knowledge and skills but also on your ability to use them in practice.
A good market player should have an analytical mindset in order to interpret trends and price movements accurately. What is more, the activity of a trader in the market needs to be planned entirely, including possible losses. After all, everybody makes mistakes. That is why when you learn how to assess your potential losses you will start yielding stable profits.
Myth 2: Traders must have a degree in Finance
US trader and author Jack Schwager has edited several volumes of interviews with well-known forex market players. It turned out that only a small number of them had a degree in Finance or Economy. In fact, many successful traders never graduated from university. Schwager believes that success in Forex does not depend on your knowledge of theory, complex formulas, and charts.
Traders should have the following qualities:
ability to analyse the news that affect the market;
ability to respond quickly to sudden changes in data.
Market players should also know how to control emotions so that they can stay composed in stressful situations. In addition, they should be very attentive as the most patient and diligent can achieve great success in the market. As for financial skills, market players develop them while trading. Today, many brokers offer users a demo account that gives them an opportunity to learn the basics of trading without any risks of losing money.
Myth 3: You should have big money to trade in Forex
Indeed, only selected investors with large funds used to have access to the forex market a long time ago. But times have changed: today, in order to start trading, you can have a relatively small amount of money. Some brokers, for example, only require a $100 deposit and provide leverage trading, that is, when funds borrowed from the broker are automatically withheld when the trade is closed and profits yielded are kept by the trader. This is actually one of the main reasons why Forex attracts so many traders day after day. The majority of them have already found out that it is possible to earn in the forex market without a large initial deposit. They know that by adopting an effective trading strategy and money management approach they can expand their capital.
Myth 4: Forex trading makes you rich
This is perhaps the most widespread belief about the forex market. The myth is being cultivated by a huge number of people that have never tried to trade in Forex but have heard that you can become rich there in a matter of days. Clearly, there have been exceptions in forex history. Yet, in most cases, a trader should work hard to make a solid profit. After all, Forex is a job and not a lottery that can turn you into a millionaire in a blink of an eye. You should bear in mind that you cannot earn a hefty sum of money in Forex within the first few days and even weeks. Success in the forex market comes to those who are patient. As a rule, you can reap profits in several months at least.
Myth 5: Forex is like gambling, fortune decides everything
In Forex, you cannot simply rely on fortune as in gambling – it is reckless and irrational. If that is your “strategy”, you are doomed. Successful market players know that trading is not a roulette, and fortune has nothing to do with it. Undoubtedly, there is uncertainty in Forex as in any other market. However, it does not mean that everything here happens haphazardly, and trading results have no reasonable explanation.
Conversely, any changes in the forex market depend on the world news. That is, your trading strategy should take into account the situation at the global stage. The only way traders can earn stable profits is by constantly analyzing external events and the internal market situation. Let us take short-term fluctuations as an example. Novice traders usually see them as chaotic movements. However, the more experienced traders become, the more sure they are about the correlation between fluctuations and economic indicators of a country, as well as market expectations. These indicators can be forecast, which means that those market players who take them into account can easily predict the result of the trade.
Myth 6: You can become a victim of scammers in Forex
Unfortunately, it often happens that newbies lose their capital due to the lack of experience. They start to believe that the broker deliberately caused the loss of their funds. This is the very case when the myth about fraud in Forex is completely unfounded. Unwilling to accept mistakes, the trader blames it on the broker. Of course, there are opposite examples when traders fall prey to fraudulent activity. Scam brokers take advantage of inexperienced beginners by offering them quick success. Once naive traders deposit funds, the broker cuts all ties with them.
Such incidents make beginners believe that the forex market is a swindle. This is where all the talks about Forex scam come from. Nevertheless, traders should not make hasty decisions as reliable brokers who value their well-earned reputation actually exist. When choosing a broker, market participants should always pay attention to its financial reliability, the way the company protects clients’ funds, feedback about its operations, and achievements.
Myth 7: Complex strategy is the key to success in Forex
Experienced traders know: the simpler, the better. It is all about a trading strategy that should always meet two main criteria: to suit the trader and to be easy to understand. Unfortunately for beginners, they do not always listen to the advice of their experienced colleagues. Oftentimes, they intentionally adopt the most complex strategies, suggesting it will help them succeed in trading.
This is not actually the case. Sophisticated strategies with a great number of indicators do more harm than good, especially if followed by amateurs. You should always remember that words “complex” and “profitable” are not synonyms in the forex market. For that reason, you should decide on a simple plan that can guarantee you a stable positive dynamic at the start of your trading path. More complex strategies can be employed with time after you have gained experience, though it is not necessary. Many professional traders reap profits in Forex, pursuing the simplest trading methods.
Myth 8: If you want to make profit in Forex, you should buy a robot
This is another common misconception about the forex market that urges many beginners to purchase automated trading systems. Undoubtedly, signals sent by such programs can make the life of a market player easier, suggesting the right solution on a trade. However, they cannot turn you into a successful trader in the short term. The market does not stand still. There is no machine that could react to all its movements timely and in a sensible way. If such a robot had existed, trading would have been easy and everyone would have quickly become a millionaire.
So far, only reason and understanding of reality can help you make money in Forex. Traders aiming to succeed should analyze the market themselves and not delegate the responsibility to a program, though it can be a good assistant. Market players should not forget that there are more effective tools of passive trading, like ForexCopy that allows them to copy orders of successful traders.
Myth 9: Forex trading is time-consuming
Frequency does not mean more profits. Newcomers should remember that. The frequency of your trading does not affect your profits. Forex is not a sport where you increase the load in order to achieve desired results. Here you can track the market situation all day long, as well as conduct analysis and build strategies non-stop, but incur losses at the end of the trading day anyway. Conversely, you can look through charts several times a day, open a few trades, and earn money as a result.
Forex does not require you to be active all the time. The quality of your knowledge is what actually matters. That is why you should dedicate more time to self-education and development of a strategy at the start of your trading career. You should try to improve the quality of your trading instead of opening/closing as many positions as possible. Find time to look through recommendations of professional traders and learn from mistakes of others - it will do you a lot more good.
Myth 10: Every successful trader has a secret
Indeed, there is a formula for success in Forex, but it is definitely not a secret. Today, any book about trading can provide you with all the necessary information about successful trading in the forex market. Other unique recipes for success do not exist.
Almost all professional players who receive a stable income in Forex adhere to the following rules:
develop a perfect trading strategy
exercise rigid self-discipline
adopt effective risks and money management approach
We hope that our review of the most common Forex myths has helped you better understand this market. We also hope that from now on, you will easily distinguish misconception from truth. Human fantasy has no limits. You should always remember about it and not blindly believe in myths. Whatever the circumstances, you should always check the information.
Myth 1: Trading in Forex is easy
At the first glance, traders’ technical manipulations seem to be simple. Anyone can install a trading platform or choose a trading strategy and instruments. Setting Stop Loss and Take Profit orders seems also like a piece of cake. However, this is a popular misconception. Trading requires constant and considerable effort. Success in Forex depends not only on your knowledge and skills but also on your ability to use them in practice.
A good market player should have an analytical mindset in order to interpret trends and price movements accurately. What is more, the activity of a trader in the market needs to be planned entirely, including possible losses. After all, everybody makes mistakes. That is why when you learn how to assess your potential losses you will start yielding stable profits.
Myth 2: Traders must have a degree in Finance
US trader and author Jack Schwager has edited several volumes of interviews with well-known forex market players. It turned out that only a small number of them had a degree in Finance or Economy. In fact, many successful traders never graduated from university. Schwager believes that success in Forex does not depend on your knowledge of theory, complex formulas, and charts.
Traders should have the following qualities:
ability to analyse the news that affect the market;
ability to respond quickly to sudden changes in data.
Market players should also know how to control emotions so that they can stay composed in stressful situations. In addition, they should be very attentive as the most patient and diligent can achieve great success in the market. As for financial skills, market players develop them while trading. Today, many brokers offer users a demo account that gives them an opportunity to learn the basics of trading without any risks of losing money.
Myth 3: You should have big money to trade in Forex
Indeed, only selected investors with large funds used to have access to the forex market a long time ago. But times have changed: today, in order to start trading, you can have a relatively small amount of money. Some brokers, for example, only require a $100 deposit and provide leverage trading, that is, when funds borrowed from the broker are automatically withheld when the trade is closed and profits yielded are kept by the trader. This is actually one of the main reasons why Forex attracts so many traders day after day. The majority of them have already found out that it is possible to earn in the forex market without a large initial deposit. They know that by adopting an effective trading strategy and money management approach they can expand their capital.
Myth 4: Forex trading makes you rich
This is perhaps the most widespread belief about the forex market. The myth is being cultivated by a huge number of people that have never tried to trade in Forex but have heard that you can become rich there in a matter of days. Clearly, there have been exceptions in forex history. Yet, in most cases, a trader should work hard to make a solid profit. After all, Forex is a job and not a lottery that can turn you into a millionaire in a blink of an eye. You should bear in mind that you cannot earn a hefty sum of money in Forex within the first few days and even weeks. Success in the forex market comes to those who are patient. As a rule, you can reap profits in several months at least.
Myth 5: Forex is like gambling, fortune decides everything
In Forex, you cannot simply rely on fortune as in gambling – it is reckless and irrational. If that is your “strategy”, you are doomed. Successful market players know that trading is not a roulette, and fortune has nothing to do with it. Undoubtedly, there is uncertainty in Forex as in any other market. However, it does not mean that everything here happens haphazardly, and trading results have no reasonable explanation.
Conversely, any changes in the forex market depend on the world news. That is, your trading strategy should take into account the situation at the global stage. The only way traders can earn stable profits is by constantly analyzing external events and the internal market situation. Let us take short-term fluctuations as an example. Novice traders usually see them as chaotic movements. However, the more experienced traders become, the more sure they are about the correlation between fluctuations and economic indicators of a country, as well as market expectations. These indicators can be forecast, which means that those market players who take them into account can easily predict the result of the trade.
Myth 6: You can become a victim of scammers in Forex
Unfortunately, it often happens that newbies lose their capital due to the lack of experience. They start to believe that the broker deliberately caused the loss of their funds. This is the very case when the myth about fraud in Forex is completely unfounded. Unwilling to accept mistakes, the trader blames it on the broker. Of course, there are opposite examples when traders fall prey to fraudulent activity. Scam brokers take advantage of inexperienced beginners by offering them quick success. Once naive traders deposit funds, the broker cuts all ties with them.
Such incidents make beginners believe that the forex market is a swindle. This is where all the talks about Forex scam come from. Nevertheless, traders should not make hasty decisions as reliable brokers who value their well-earned reputation actually exist. When choosing a broker, market participants should always pay attention to its financial reliability, the way the company protects clients’ funds, feedback about its operations, and achievements.
Myth 7: Complex strategy is the key to success in Forex
Experienced traders know: the simpler, the better. It is all about a trading strategy that should always meet two main criteria: to suit the trader and to be easy to understand. Unfortunately for beginners, they do not always listen to the advice of their experienced colleagues. Oftentimes, they intentionally adopt the most complex strategies, suggesting it will help them succeed in trading.
This is not actually the case. Sophisticated strategies with a great number of indicators do more harm than good, especially if followed by amateurs. You should always remember that words “complex” and “profitable” are not synonyms in the forex market. For that reason, you should decide on a simple plan that can guarantee you a stable positive dynamic at the start of your trading path. More complex strategies can be employed with time after you have gained experience, though it is not necessary. Many professional traders reap profits in Forex, pursuing the simplest trading methods.
Myth 8: If you want to make profit in Forex, you should buy a robot
This is another common misconception about the forex market that urges many beginners to purchase automated trading systems. Undoubtedly, signals sent by such programs can make the life of a market player easier, suggesting the right solution on a trade. However, they cannot turn you into a successful trader in the short term. The market does not stand still. There is no machine that could react to all its movements timely and in a sensible way. If such a robot had existed, trading would have been easy and everyone would have quickly become a millionaire.
So far, only reason and understanding of reality can help you make money in Forex. Traders aiming to succeed should analyze the market themselves and not delegate the responsibility to a program, though it can be a good assistant. Market players should not forget that there are more effective tools of passive trading, like ForexCopy that allows them to copy orders of successful traders.
Myth 9: Forex trading is time-consuming
Frequency does not mean more profits. Newcomers should remember that. The frequency of your trading does not affect your profits. Forex is not a sport where you increase the load in order to achieve desired results. Here you can track the market situation all day long, as well as conduct analysis and build strategies non-stop, but incur losses at the end of the trading day anyway. Conversely, you can look through charts several times a day, open a few trades, and earn money as a result.
Forex does not require you to be active all the time. The quality of your knowledge is what actually matters. That is why you should dedicate more time to self-education and development of a strategy at the start of your trading career. You should try to improve the quality of your trading instead of opening/closing as many positions as possible. Find time to look through recommendations of professional traders and learn from mistakes of others - it will do you a lot more good.
Myth 10: Every successful trader has a secret
Indeed, there is a formula for success in Forex, but it is definitely not a secret. Today, any book about trading can provide you with all the necessary information about successful trading in the forex market. Other unique recipes for success do not exist.
Almost all professional players who receive a stable income in Forex adhere to the following rules:
develop a perfect trading strategy
exercise rigid self-discipline
adopt effective risks and money management approach
We hope that our review of the most common Forex myths has helped you better understand this market. We also hope that from now on, you will easily distinguish misconception from truth. Human fantasy has no limits. You should always remember about it and not blindly believe in myths. Whatever the circumstances, you should always check the information.
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