Whether you have been around forex trading for a long time or you are a newbie, there are always some fables and myths about forex trading hanging around you. The forex trading misconception can influence and affect anyone, no matter how long they have been pursuing the forex trade. While there are a lot of such falsifications associated with the foreign exchange market, we will talk about the top forex misconceptions that you should know.
Forex Trading Misconception #1: Only feasible for Short Term Trades
Fundamental factors drive long term trends and movements of the forex market. Such trends are immensely tradable and beneficial when pursued the long term. Yes, high leverage offered by forex trade has made it all more famous among traders. But that is not the only way to track and trace the forex market. Long term forex traders focus on the bigger picture and do not fret about everyday fluctuations and changes happening in the trade. Taking a long term approach in forex trading can help traders in reducing spreads in forms of commissions.
Forex Trading Misconception #2: Righteous Prediction is the only way you make Money
Many fresh and new forex traders believe and practice prediction to make money in the forex market. Trying to predict the future actions of the market can be a significant downfall for any forex trader. Prediction can lead to prejudiced decisions and can disturb rationality. In forex trading, traders who make considerate profits are the ones who can take actions in a quick way when different things happen around in different countries.
Sometimes, trading predictions can work. But it has to be done with utter precision analysing charts and patterns of the past trades and assuming that such patterns will occur again. But most of the time, it is the reflex and quick actions the trader takes rather than predictions that make money in the foreign exchange market. A good and intelligent trader always stays on the edge of his or her seat, monitoring the market, saying vigilant.
Forex Trading Misconception #3: Complex Strategies are Better
Traders mostly start with a basic strategy and get a small return. Then they go on adding to the method expecting larger returns. Well, this is not the case. Complexity is not always good. It rarely happens that implementing a complex strategy will get you quicker and more returns and profits. Actually, complex strategies can prove to take up a lot of time and effort and are difficult in execution. Good traders often go with simple and straightforward strategies that make them money in forex trading. Just adding onto your technique and building them up to complexity will only increase the risk factors for a trader.
Forex Trading Misconception #4: Higher the Leverage, Better the Trade
Forex trading with high leverages accounts to more enormous risks. Yes, you get excess money apart from your capital to trade, but there are more chances of high risk. What if your trade fails? Then you would not only lose your initial capital but have to pay the borrowed money with interest back. Trading with small leverages reduces the possibility of losing all the money.
Forex Trading Misconception #5: Quick Riches
With forex trading, some investors and traders believe that they can get rich quickly with minimal efforts on their part. But this is not the case. Getting rich in spic and span is mostly impossible even in the largest trading market. Forex trading requires a fair amount of time, efforts, and patience to master and become an expert. Traders do not make a huge sum of money in the forex market one time and walk away. Instead, it is the efforts they put in trade after trade that makes them rich not just in monetary terms but in the knowledge they have about the market.
Forex Trading Misconception #6: One needs to Monitor the Market Regularly to Achieve Success
Yes, the forex market is open for twenty-four hours a day for 5.5 days a week. But it does not mean that the traders have to be at the beck and call of the foreign currency exchange market. Some traders even have regular jobs whilst pursuing forex trading with picking out some little time for the trades. They execute some trades at the end of the day and make good incomes. One really does not have to sit in front of the computer screens all day monitoring the charts and patterns.
Additionally, there are Robo advisors and automated software available that do most of your work for you.
Forex Trading Misconception #7: Large Capital is needed
Long gone are the days when only big international financial institutions and regulated banks had access to the forex trading market. Thanks to the updation in electronic trading. Now, even individuals and small institutions can facilitate trade. With so many brokerage accounts offering forex trade, it is not hard for traders to go with forex trade. Such brokers offer high leverages with minimum capital deposits. If you are inspecting an online broker to facilitate forex trading or any other trade, we would recommend TradeATF. TradeATF is a regulated broker functioning in Argentina, Bolivia, Peru. TradeATF deals in a wide range of instruments like stocks, indices, forex, ETFs, commodities, metals, and more.
Forex Trading Misconception #8: You need to have a degree in Economics
Yes, forex trading does require a fair understanding of world economics so that traders have a clear account of how currency exchange is working in different countries, what factors are influencing those exchanges.
But it is not necessary to have a degree in world economics or that you know the economic positions of every country.
There are many experts and professional forex traders who come from varied professional and educational backgrounds. To be a good forex trader, you need to know just enough about the economic outlook of currencies and the countries you are interested in.
Forex Trading Misconception #9: Easy Trade
This is one of the most common myths associated with forex trading. Research and read a bit about the market, open a brokerage account, and you are ready to reap huge gains in the forex market. Well, it takes so much more. If you are dreaming that you can go to the market and make quick money without any learning and system, then you are in for a bumpier ride. The traders who turn out to be successful in forex trading are the ones who put in a lot of efforts and have learnt from their experience continuously.
Forex Trading Misconception #10: Following others in the Market will Lead you to Profits
There are always so many people and the internet giving you advice on how to trade, what to trade, till what time to trade. But at the end of the day, it is your money. And you will solely witness the gains or the losses. Therefore, instead of chasing the crowd, you should develop and hone your own skills and learn from the market. Yes, It is okay to see what others are doing. But it is better to do your research and see if a trade is viable for your financial goals.
Traders and investors need to do their research before jumping in the forex trading market. At the same time, money management and the volatility of the forex market are two main things that every tinder has to keep in mind. The forex trading markets are full of multitudes of myths and misconceptions. Traders mustn’t fall for such folklores and think logically while pursuing the market.