The Forex Trading business has been the butt of many controversies and misconceptions. While many of these have been long carefully dispelled, some, however, still persist. The following are the top 6 of those.
Easy Way to Get Rich
The perceived huge financial rewards associated with trading in the Forex market have been attracting more and more folks to it. High leverage, small margins, abundant research and education resources, and unlimited wealth of associated options can easily guile those individuals into thinking that it is an easy way to get rich.
Misconceptions about Forex.
Of course, that is wrong. To succeed at Forex trading, you will need as much desire and dedication, if not more, as you would in any conventional career. You also need to have a sound psychological makeup, a strategy that works, use a reputable online broker, and make use of tools that can help improve your performance.
A compromise in any of those factors will also compromise your results. The Forex market is a highly-competitive environment and it is either you go hard or you go home.
The delusion of Market Control
The delusional thought of being able to control the market is another big misconception that many Forex trader have about the market. One time, you might think you are going right and it is getting under your control. You take trades without caution and exit them at whim. Those times, it seems you do not have to think at all about the market before you can profit from it.
Then, the bad times arrive. It is those times that you realize you were never in control, that you have been delusional instead all along. Overconfidence is an undoing of Forex. You rather have to accept the fact that no one knows what exactly is going to happen in the market next second, next minute, next hour, let alone the next day.
Accepting that the market is not and will never be under your control is the first step to protect yourself against many unnecessary losses.
Unlimited Use of Leverage
Forex trading is attractive and notorious for almost the same reasons. And one of those things is leverage. There is so much availability of leverage in Forex trading that many brokers offer as much as 1:000. Many traders, beginners especially, get fascinated by that only to eventually get hooked on it.
First, what you should know is that Forex brokers offer so high leverage just to attract clients. You do not have to use it. Of course, the potential rewards of leverage are high. However, the more of it you use, the more of your funds you risk, too. High market volatility, slippage, and trade liquidation can make the use of high leverage utterly disastrous.
Hence, you should know that leverage is not to be unlimitedly engaged. That is a misconception. Instead, you should be prudent in its use.
Trading is Gambling
No matter how much you try, certain myths about you won’t just go away. They can be those high school allegations of things you never did, but which still persist. For Forex, it is: Forex trading is gambling, like lotteries, like Bingo, like casino, like poker, like betting on billiards or pool. Forex is not like any of these and it is totally surprising how such belief could have continued for decades.
Unlike gambling, trading has a logical backing. It is not based on hope or whims. It is speculating based on a close evaluation of risks and rewards. When you trade, you are taking up a calculated risk, with a full understanding of the magnitude of the potential loss. Trading requires knowledge, not luck. It required analysis, not tricks.
Thus, gambling is a terrible strategy to use in the Forex market. Sooner or later, it is always exposed.
100% Effective System Belief
The first fact you need to know about the Forex market is that it is not 100% predictable. Anyone who tells you otherwise is lying to you. Forex trading is a calculated exercise that requires a close assessment of risks and rewards. No matter the strategy being used, there will always be risks. Hence, it is important you understand this before you participate in it.
“My strategy is 100% effective” is one of the misconceptions in Forex trading that won’t just go away. There is no holy grail of trading system. Do you know an interesting fact? You do not even need one. Many of the best and most successful Forex traders actually use strategies that are just 50-60% effective. Instead of chasing phantom profits in the market, they instead concentrate on limiting drawdowns.
Hence, do not be deceived. There is no fool-proof trading strategy in the Forex market. That is why you should rather adequately manage your risks.
A Right Way to Trade
There is an ages-long debate of which of fundamental analysis and technical analysis is the best approach to the Forex market. As expected, the debate continues to generate controversies, with many traders taking sides with one while going against the other. Importantly, we recommend you should not join this debate.
Forex trading is not a one-size-fits-all activity. As a result, it does not have any one-size-fits-all approach also.
Summary
Misconceptions abound about Forex trading. That would not have been bad except for the cost implications that they can have for your trading. Of course, you can make irrational trading decisions because of them. There are two ways out of that, however. You either develop a rock-solid base of sound trading education or use Forex trading signals.
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The latter, of course, is cheaper and less stressful. With high-quality trading signals, you can profit from Forex without having to analyze the market yourself. 1000pip Builder can help and you should check them out. can help and you should check them out.
