Those who have just started out or have already dabbled in the forex market will be aware that there is a minefield of information available on the web. As with many industries, there are many truths and untruths floating around on the internet relating to forex so it’s not always easy to be sure that the information you are reading is correct.
For a novice trader, these can hinder the ability to learn and may lead them to take more risks than necessary. For this reason, it is best to be aware from the outset that there are many myths in circulation relating to forex. To follow are our Top 5 dangerous myths about the forex markets which should be dispelled.
1. Forex Trading Is Easy
Yes, it is easy to start forex trading as it is to buy and sell currencies online and with easy access to the internet and a wealth of online resources, it may seem like a simple way to make money. However, succeeding and making money is not easy. Forex is a complex market where it is possible to make money regularly but it has many challenges and is risky.
Becoming successful takes time and practice. Novice traders need to put some of their time aside to educate themselves practice at building strategies that work. The only way to be successful is to view forex trading as a business and work hard in order to reduce the risks to a minimum. Many novice traders also mistakenly rely on signal-following which is effectively placing the responsibility for their actions on someone else. In reality, many beginners have ended up with big losses this way, so it is important to learn to rely on your own knowledge and skills.
2. There Is A Holy Grail In Forex
There are many people out there who believe they can find a unique or 'magic' strategy that will earn them millions and continue doing so. A simple Google search will reveal endless strategies and systems that claim to be 100% accurate which are 'guaranteed' to work. The truth is, every method used has its downside and is prone to occasional losses.
Every seasoned forex trader knows that returns are not possible without some kind of risk. Successful traders are always changing their strategies and adapting them to the current market conditions. Forex strategies simply cannot be expressed by a simple set of rules but must be used with flexibility, making adjustments where necessary, in order for them to be really profitable.
3. Forex Trading Is Gambling
Although there is no certainty in the forex markets that does not mean it is completely random and it is most certainly not gambling. With forex trading, your success depends mainly on your skills and experience, not on your luck. This myth is frequently heard regarding many forms of trading including stocks, futures and binary options.
The truth is that forex embodies the principles of macroeconomics, perhaps even more so than other types of trading as it deals with the performance and behavior of economies as a whole and their relationships with each other. Long term movements of currency pairs, for example, are far from random and are controlled and influenced by global and national economics which completely dispels the myth that forex trading is gambling.
4. Forex Is Rigged And Controlled By The Central Banks
As we have seen, it is true that central banks and governments can control a currency's price to a certain degree but as a forex trader, you are not there to pitch yourself against them. Forex traders are there to take advantage of the edge they have created through their own trading strategies and trade according to what the market tells them.
Some traders are known to complain that the market always seems to be against them and that every trade they make is a losing one. They may also blame the broker or the government but the truth is that foreign exchange rates change often and are too volatile to be rigged. Blaming everyone else for bad trades will hinder your success as a trader so it is best to get educated instead and learn how to profit from the current market conditions.
5. Forex Trading Is Only For The Rich
This may have been true once upon a time when forex trading was allowed for only banks and large fund managers. This is no longer the case as the development of high bandwidth in the common Internet connection coupled with the financial backing of the largest financial institutions in the world has opened the door to forex for everyone.
These days, it is easy to open a forex trading account with as little as $25 and it is possible to trade with as little as $1. Although to achieve a higher level of profit, a bigger investment is required, forex trading is by no means just for the rich and there are opportunities available even for those with a minimum amount of capital to invest. These days, nearly all forex broker offer demo accounts, allowing traders to practice trading without investing any real money before investing in real-live trades.
These 5 myths have created a lot of confusion within the forex trading industry so it is important that a trader should be aware of them. Knowledge is power, hence traders should be able to distinguish some of the most common myths from what is real. Overall, it is important not to get taken in by false promises that forex trading is a way to get rich quickly.
However, it is equally important that traders should not be deterred by the markets simply because some people believe it is not possible to earn money there. A sensible and educated approach incorporating appropriate trading strategies will ultimately determine whether a trader will be successful.