Forex trading has gained much popularity around the world in recent years. However, along with the growth of new traders, we also see a spread of many trading myths, which can cost many newcomers a lot of money. So which are the most common ones?
There are quite a few myths about forex, some of which may contradict each other. Today, we will briefly describe the ones we see most frequently.
Trading forex is easy
The most common claim you’ll hear from someone who wants to sell you their trading system or mentorship for big money. In theory, this statement might seemingly make sense because downloading and installing the app, and then opening a trade really is simple, no doubt about that. But as we all know, that is not even the tip of the iceberg, real trading takes much, much more than that. Spending hundreds of hours studying, creating & backtesting new strategies, dealing with the psychology – all of that and even more is necessary to go through if you’re serious with trading.
A successful trader must have an economics degree and a high IQ
This statement is a bit contradictory to the previous one. In any case, you don’t need a college degree or an economics degree to trade forex. On the other hand, you’ll need to study at least the basics of financial markets, learn about technical analysis, etc. You won’t be a successful trader without putting in the time and effort.
Forex means fast earnings
Another myth that someone will try to use in order to sell you something. There may be traders who made lots of money relatively quickly from the start, but in the vast majority of such cases, their success is heavily supported by luck. Again, you will not be successful in the long run without the time to trade and study. Forex trading is a long-distance run, not a sprint. No one is born a successful trader.
Forex will provide you with a regular income and independence
This is the wish of most traders, but only a small number of them manage to actually make a living by trading. However, even the most successful ones can end up losing money for several weeks in a row. Especially for beginners, forex should be a supplementary source of (often unstable) income, and the regular salary should remain the basis of their monthly income. Then there’s the psychological effect as well. Many traders do well in forex as long as they have a regular second income. But once you quit your regular job, then you are literally forced to be profitable in order to survive, which many traders can not cope with.
A successful trader must continuously monitor the markets
Less is sometimes more. Forex is a market where you can trade 24 hours a day, but that doesn’t mean you have to spend all your free time in front of a monitor. It certainly doesn’t automatically lead to success, but rather the opposite.
The more trades, the better
This myth is related to the previous one. Many beginners feel that the more trades they make, the more likely they are to succeed. However, the opposite is true. Successful traders (successful scalpers are the exception that proves the rule) enter the market only after mature consideration, following their strategy and choosing only the best setups. And there may not be many of them. Many trades can lead to many losses and unnecessary stress.
The more tools, the better
Here it is similar to the number of trades. While diversifying among multiple instruments can be beneficial for more experienced traders, tracking too many instruments is somewhat counterproductive. Instead, it’s better to focus on one or a few instruments and master your strategy to perfection.
More leverage, more profits
This may be true in theory, but it is also true that with more leverage come more significant losses. If a trader can absorb this and mentally handle relatively significant losses, then the higher leverage may pay off.
You need a lot of money to trade forex
This may have been the case in the past, but today, this problem can be solved by companies like FTMO. If you show us that you can trade in a disciplined manner, we will allow you to trade with a much larger account than you could afford.
The more complex the strategy, the better
Some traders may tell you that they use a complex strategy to filter out potentially losing signals. However, they may end up making virtually no trades. Instead, many traders find that consistent profitability will bring them the simplest price action and an adequately set RRR.
A good borrowed strategy (from a successful trader) means guaranteed success
Again, this is more of a marketing ploy by those selling their products than the truth. A good strategy is a basis for success, but there is no holy grail that only generates profitable trades. Without mental toughness and discipline, any strategy can lead to losing money.
The successful ones are those who have no emotions and a big ego
Too much emotion does not belong in trading, and a poorly set psyche can do much damage. But overconfidence can also have a harmful effect in the long run. A successful trader can learn from his mistakes, but first, he has to realize these mistakes. At the same time, he tries to use his emotions to his advantage.
The most successful traders are always right
No one, not even the most successful investor or trader, is always right and achieves 100% success. The best ones, however, can minimize their losses and make the most of profitable trades.
The big players manipulate forex, retail has no chance to make a profit
We’re sure you’ve heard of “stop-loss hunting” because the big players know where retail traders have their pending orders set. A few losing trades where the market blew you out exactly at your SL and immediately turned back will have confirmed this assumption for you. In reality, however, it could easily have been a badly set SL. Forex is such a big market that manipulating the price is virtually impossible. So while the big players are aware of pending orders, retail traders should instead adjust their SL and PT to the market action and not speculate on market manipulation.
Brokers trade against clients
Given that there is a lot of competition among brokers today, such behaviour is rather an exception. Unless the client trades with a market maker broker (which has the ability to influence the prices that clients see), the possibility of price manipulation by the broker is virtually nil.
Forex is a casino
Many people indeed perceive forex as gambling, and some traders behave as such. In reality, however, a trader has a much better chance of success in forex because he or she has it largely in their own hands. You can’t make a long-term profit in the casino, that’s a mathematical given. On the other hand, forex traders can make a long-term profit with discipline and honesty. But it takes time.
The most money is made at the time of publishing the news
At first glance, this may seem like a good idea because at the time of publication of important macro data, the markets can experience significant movements. If you miss the right direction, however, such trading can cost you dearly because if the movement is too significant, even a stop loss may not protect you from a significant loss, and you may end up losing your entire account on one trade.