Famous Myths and Legends about Forex Trading
March 4, 2024
Forex traders aim to profit by buying currencies at low prices and selling them at higher prices. This type
Famous Myths and Legends about Forex Trading
Forex traders aim to profit by buying currencies at low prices and selling them at higher prices. This type of trading has become popular, especially with the widespread availability of online forex brokers. Many investors in the forex market achieve high profit margins in their individual trades. However, this does not negate the reality of losses.
Many traders have incurred significant losses during their investments.
This has led to the creation of many myths and legends surrounding the forex market. New traders often fall into the trap of these myths. We will critically examine these myths logically and review some misconceptions about working in the forex market, including:
• Forex trading is easy.
Many people believe that forex trading is easy and simply involves opening a real account, making a deposit, and then being able to earn daily profits by spending 2-3 hours in daily trading. However, this is actually just a myth and has no truth to it. Success in forex trading is not easier than mastering any other profession; it takes time, money, and a lot of practice.
• Guaranteed Profit-Making Strategy
The second myth that forex traders often believe in and hear a lot is their search for a guaranteed profit-making strategy. How can a trader believe in this myth when they know that the forex market is built on both profit and loss? This means that the possibility of loss is also present, and there is no such thing as a guaranteed profit strategy. The reality is that a trader can follow a strategy based on increasing profits and reducing losses.
No individual, institution, or entity can predict the market direction, whether it’s upward or downward. Even professionals cannot guarantee whether the market is bullish or bearish. However, there are some factors that help in predicting market direction, such as technical and fundamental analysis.
• Commissions are charged by financial brokers in Forex trading.
When choosing a suitable financial brokerage company in terms of safety and trustworthiness, it’s important to know that you are required to pay only the spread, not a commission.
So, what is the spread? It refers to the difference between the buying and selling price of a specific financial instrument in the financial markets for a certain period of time. It is considered one of the primary sources of income for trading brokers.
• There's no importance to learning, you can buy an automated trading program.
This belief is closer to gambling or luck, and it’s a major myth that could lead to losses. The reason is that relying solely on a trading program without acquiring knowledge may result in following a strategy blindly. Forex trading, like any other business, requires the factor of experience and knowledge for investment to succeed.
• You need a lot of capital to profit in Forex.
Investing with a large capital won’t instantly build wealth for you. You don’t need a lot of money to diversify currencies, and currency prices can’t move according to your trading orders (you’d need billions of dollars to do so).
Simply put, you can start with very little capital, and you can rely on leverage provided by your broker for larger investments.
• Trading in a demo account and a real account is similar.
Many traders believe that if they succeed in trading on a demo account, they will surely succeed when trading on a real account. This is completely wrong. The emotions of a trader trading on a demo account are completely different from the emotions of a trader trading on a real account.
Now that you’re familiar with some of the most common myths and legends about Forex, be cautious about believing them and consider reading the tutorial on risk management through the following link:
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