There are many myths and misconceptions surrounding the world of Forex trading, especially amongst newcomers and those still researching the market and deciding whether to dip their toes in the water.
Here are some of the most common you might encounter:
Forex is a scam
This is just not true. Although there may be unscrupulous types operating under the Forex banner there are also regulated and trustworthy brokers and institutions. It’s important to do your homework and choose reputable ones. Forex as a whole isn’t a scam but it would be fair to say that there’s a risk to Forex trading, just as there is to trading on the stock exchange, futures and many other types of potential high-yield investments.
Forex is a get rich quick scheme
It is possible to make a lot of money in a short space of time but, using the tactics you’d need to do that, it would also be possible to lose a lot of money in the same period. Successful traders are generally those who develop or perfect a trading system that’s right for them and use it consistently, not risking more than they can afford to lose. This approach takes time and patience but can yield great results in the long run.
Forex trading is only for the wealthy
There used to be some truth to this but with high-speed internet connections being pretty standard and high leverage allowing traders to make substantial orders with relatively low starting capital, now anyone can trade Forex. Again, though, you should never risk more than you can afford to lose, which is where a starting pot of ‘disposable’ capital can come in handy.
There’s a ‘Holy Grail’ of Forex strategies
You may, no you will, come across individuals offering to let you into their secret, infallible Forex trading strategy – often for a small fee. Finding a workable strategy is hugely important in Forex trading but there’s no one-size-fits-all technique that works for everybody and works all the time. It’s better to find one or more strategies that fit your lifestyle (how much time you can devote to trading, at what time of day and with how much capital) as well as your psychology and personality type.
You can ‘win’ all the time
As already stated, there’s no such thing as an infallible Forex trading strategy that works in all situations and market conditions. If you enter the world of Forex trading, you will experience losing trades. It sounds obvious but the key is simply to ensure your wins outweigh your losses. Newest traders soon stop thinking in terms of certainties and precise market predictions and more along the lines of probabilities and risk-to-reward ratios.
Complexity is better
It’s true that the Forex market is a complex one but that doesn’t mean that trading strategies should be over-complex. Logic and methodical decision-making are good but overly complex systems could see you missing good trades as you wait for all the pieces to align. Sometimes simple strategies can be successful.