The forex market is full of dreamers and daydreamers. What differentiates them is that the latter usually fall victim to these forex myths. Read on to know what you should avoid.
Forex Myths 1: You can get rich quick
The improvements in advertising also paved the way for the faster expansion of the retail forex market. This also paved the way for the first of the common forex myths: you can get rich in a snap.
While it is true that you can get rich in forex, it doesn’t happen overnight. Trading requires patience and you really got no final destination ahead. You don’t just make money and then walk away.
You have to make trade after trade after trade, even if there are time gaps. It requires consistency and not luck like gambling.
Forex Myths 2: Forex is just for short-term traders
The high amount of leverage has made short-term forex trading highly in demand. But that doesn’t mean it should always be like that.
Fundamental factors drive long-term currency trends, and you can trade these trends. Long-term traders focus on bigger trends. That means they don’t care much about daily fluctuations.
There’s a strong case that longer-term trading can reduce the number of spreads you pay. You can also probably avoid short-term impulse trades.
You may even use currencies to diversify or hedge buy-and-hold portfolios.
Forex Myths 3: Somebody rigged the market
Losing traders usually put the blame on corrupt brokers or even the market itself when they fail. While it’s a popular scapegoat, the forex market is not faulty.
The forex market is the largest market in the world. There are hundreds of thousands of transactions and thousands of inputs – each day.
As a result, if someone engages in shady business, other savvy participants will immediately notice.
Read further: The Forex Market and Macroeconomic Factors
Forex Myths 4: More trades and pairs means more money
Some traders think that the more pairs they trade and the more trades they make the more they can make money. That’s simply not true.
Generally, trading less and focusing on just a few currency pairs will be better for most traders. Unless you’re a pro at scalping, you’re better off being patient, focused on what you know, and on the lookout for the best opportunities.
Forex Myths 5: You can make money by timing the market
Trying to predict the market can be your downfall. Surprisingly, this is what most beginners try to do. Predicting can be blinding since it causes psychological biases. It can disrupt your judgment.
You should be nimble and trade according to a system. The market constantly moves and should dictate your trades.
If you make a prediction, you should wait for the currency movement to confirm your prediction.
Forex Myths 6: More complicated strategies are better
Traders usually begin with a simple strategy and gain a small return. Afterwards, assume that tweaking their system a bit here and there will increase their returns. This is simply not true, too.
Rather than looking at simple things like price movement, the trader tries to spot the reversal point and make trades. You make trading profits at the margin.
Therefore, if you find a strategy that makes money, better stick with it. You should instead focus on money management.