THE There is no doubt about the influence and growing popularity of foreign currencies (forex). Yet myths and misconceptions still cling to the largest financial market in terms of trading volume. There are positive and negative myths about forex. Both also need clarification.
1. You need a lot of money to start
This has not been true for nearly two decades. The myth is debunked every day with many new traders entering this dynamic market on an hourly basis. More than 1,200 forex brokers compete for these new customers and regularly improve their trading conditions.
The decentralization that has come with the internet goes hand in hand with the democratization of the once elitist forex field, opening up to ordinary people around the world.
The journey with forex trading can start with a relatively low initial deposit, depending on the broker and their terms.
2. A high level of leverage is good
High leverage is not necessarily “good”. To be more precise, don’t consider it “good or bad” – but rather “risky or safe”. High leverage should not be applied too often as part of good risk management, especially by novice and intermediate traders.
Experienced traders who have reserve capital to experiment with – a small fraction of their portfolio – can try a high leverage game with a promising new trading strategy. The potential gains could be considerable, but the losses would quickly eat up the initial funds.
Never invest or trade more than you are willing to lose. This is true for any leverage ratio.
3.Eeasy and fast money with forex
This is perhaps the strongest myth in forex that unfairly attaches the charge of “gambling” to service. There’s no “easy money” with almost anything – especially on a regular, honest basis.
Money is hard earned. If someone trades forex successfully, that person devotes a lot of time and effort to developing themselves psychologically, mentally and intellectually as a trader.
Research the market, read literature, use online forex training that brokers provide, and follow well-designed trading strategies. Also, always use proper risk management tools. Instead of “quick and easy money”, hard-earned and lasting profits will follow.
4. Is forex only suitable for short-term traders?
Many people trade overnight, following the movements of a short-term asset. Due to the lucrative but risky option of high leverage, this has become very popular. Popularity is not a measure of how forex should or could trade. Long-term strategies can also be applied.
Long term trend traders have a different psychological approach as they are less concerned with what is happening with a financial instrument in a single day. Market traders who find themselves dealing with long-term trades have another advantage on their side: they save capital on the spreads paid per order.
Spreads are the forex “commission” incorporated into each open order. Rather than paying many daily spreads equivalent to open orders, you pay much less spread since you have fewer orders over a longer period.
5. The forex market is rigged
Out of frustration, many former and current forex participants believe that the market is in fact rigged. They believe that some authorities or insiders are manipulating or controlling the market to exploit the positions of ordinary traders to extract their funds. There has never been conclusive forensic evidence of systematic and continuous manipulation of the foreign exchange market.
Historically, there have been examples of powerful and extremely wealthy actors exploiting and taking advantage of temporary institutional weaknesses, such as in central banks. But this rare criminal behavior is possible in any market and is not a hard-wired attribute of forex.
6. You can predict the market
Of course you can’t. But many participants delude themselves into thinking they can. This is a psychological trap that someone can fall into, which can eventually lead to losses. The only way to do it is to deal with the odds – backed by research, technical analysis, solid psychological fundamentals and a valid risk management strategy. You should never make trading decisions solely on hunches, hunches, or hunches.
Anyone who claims to be able to predict the market or promise to sell you the skills to do so is neither trustworthy nor reliable.
seven. The more trades you make, the better
You can quickly lose the organizational and analytical overview if you have too many active orders – unless it’s one or two assets you know inside out. First, get used to tracking one to two commands a day and find a realistic pattern of how many moves you can manage simultaneously.
If you start to lose track of an asset, you have overloaded yourself: bring the total trading orders down to a manageable amount.
Some successful traders open many orders to maximize their profits. However, it is a testament to the development of their skills and experience gained over a non-trivial period.
Focus on quality, not quantity. Focus on the one right trade every time. Just do the math, all you need is one solid trade on average per month to enjoy the 2% to 5% return. Why bother taking so many trades only to end up having roughly the same results? And worse if it makes you more vulnerable to unnecessary mistakes.
This article is provided by the international forex broker OctaFX.