Common Forex Trading Myths You Should Know

 

The FX market is also the largest financial marketplace in the world by trading volume. According to statistics, over $10 trillion is traded daily, and this is why this financial marketplace remains attractive for both traders and investors.

As a professional trader or maybe a novice, creating and nurturing a winning strategy to trade Forex with minimal losses can be challenging. This is because, in the world of forex trading, there are many myths and misconceptions constantly circulating in the space, which incites either fear, greed, or doubt amongst traders.

These misconceptions tend to affect traders who run with them instead of digging deep to know whether there’s some truth to it or not. This is why, in this article, we will discuss various myths and misconceptions that have plagued traders in the Forex space and what you should know about them.

Recommended Read: Who Controls the Forex Market?

Forex Trading Common Misconceptions

1. You need to be a whale to trade forex
 

This is a common mindset among novice traders or those who don't know how the FX market works.
 

The Forex market is vast, and there's no doubt that those who earn huge profits are institutions, government bodies, or whales who invest large sums of money in the Forex market.
 

However, the Forex market is open to all to trade:whether you have $10,000 to trade or $100 to trade, you can get started with trading.
 

As a trader with a $100 trading account, you can use Leverage to your advantage. Leveraging can help you take large positions with the $100 capital to trade, allowing you to make really good profits after trading successfully.
 

However, it is essential to know that leverage trading is risky. As much as it amplifies your profits, it also amplifies your losses. This is why understanding and developing a risk management strategy is crucial.

2. Trading Forex is easy
 

This is a Forex trading myth that gets most seasoned traders in the Forex market either laughing or full of rage.
 

While it is easy to assume that all you need to do as a Forex trader is monitoring the green and red candlesticks all day, trading Forex is way more technical than that.
 

Forex trading is a type of trading that involves patience, analytical thinking, critical thinking, risk management and mathematical skills. This is why professional traders in the FX market go through years of learning & failing before they can come up with a winning strategy.
 

As a successful trader in the Forex market, you need to understand the way charts work, and how/when to implement technical and fundamental analysis.

Learn about the 3 Types of Forex Market Analysis!

You also need to know when and how to trade, trading without emotions, and so on - and this is why trading is more than just staring into the computer and placing trades.

3. FX Trading is an easy fix to getting rich
 

This is a very risky misconception among novice traders and those who don't know how to trade Forex. Millions of individuals with this mindset have entered the Forex market to trade but left the market broke and worse off than they came in.
 

The Forex market is not a place where this mindset works, because you are dealing with an unpredictable market. Unexpected shifts and market movements can result in losses at any time. Worst-case scenario, if you are trading with leverage, your losses will be doubled.
 

The reality of Forex trading is that there is no shortcut to overnight wealth. It is essential to know that traders who got wealthy and successful trading forex developed patience, discipline, a strong will to succeed despite all odds, and a winning strategy. Trade after trade, they kept at it consistently for years.
 

Although it is possible to earn good profits in the short run, it is also essential to view forex trading with the right mindset and plan to stay for the long run.

4. The more technical your trading strategy, the better
 

Another myth/misconception about forex trading among both beginners and professional traders is that your trading strategy should be very technical for you to make profits.
 

This doesn’t apply to all scenarios. . In some cases, complex/technical strategies will fetch some profits, while in other cases , simple strategies like monitoring the charts can get the profits coming in.
 

Complex strategies do not guarantee consistent profitability. Instead, continuous learning, adapting to market changes, and perfecting your Forex trading skills will make you profits in the long run.

5. The Forex market is predictable
 

This is a persistent myth in the forex market. While most successful traders seem not to agree with this completely, it is a tough one to debunk.
 

This is because many successful traders who have spent years understanding how the market works make it seem like you can predict the market easily - but it doesn’t work that way.
 

It is important to note that the forex market is controlled and influenced by various factors and events.
 

These factors and events include but are not limited to:

• Economic indicators
• Geopolitical events
• Market sentiment

These factors make it difficult to accurately predict how the market moves or swings in the short run. Therefore, if you attempt to predict the market, you will be working with probability.
 

By including risk management techniques, identifying high-probability trade setups, setting realistic profit targets, and managing your positions well, you can make profits despite the events that influence the market.

6. There is no need for mentors
 

This misconception is dangerous to have. Almost every successful trader in the Forex market was trained by someone or belonged to a thriving Forex community where successful traders help each other.
 

• Having a mentor in Forex is as important as having a mentor in other industries.
• Having a mentor as a novice trader or sophomore helps you understand how the market works.
• A mentor will guide you through the ups and downs of the market and help you develop a winning trading strategy as a Forex trader.

7. Forex traders are gamblers
 

This myth is one of the strongest myths in the Forex space, and this has caused some individuals and institutions to frown at Forex trading.
 

Yes, both forex trading and gambling indeed involve risks; however, they do not work the same way.
 

Trading forex does not rely on smooth predictions or luck like gambling; instead, it depends on a combination of technical analysis, fundamental analysis, risk management, strategic decision-making, patience, etc.
 

Successful traders spend time analysing charts and candlesticks, monitoring economic indicators, and implementing various trading tools and well-thought-out strategies to make informed trading decisions.
 

Thinking of forex trading as gambling means that you view forex as a game of cards where you cannot guarantee profitability on the trades made, which is definitely not the case.

8. Forex brokers are not to be trusted
 

The forex market is very lucrative, and there are quite a lot of brokers and traders who carry out trades for individuals, private organisations and government bodies. They make profits for these institutions and charge a certain percentage when profit is made.
 

However, in marketplaces like Forex, some bad actors lie to individuals and profit from their trading capital.
 

This is not only witnessed in the Forex market, but in almost any industry or marketplace. This is why it is essential to adequately research the brokers or agencies you want to use to help you carry out your trades to avoid loss.

9. Forex trading is the fastest way to lose money
 

While this might be true in some cases, it does not automatically apply to all. . It is important to understand that losses occur frequently in FX markets whether you are a seasoned trader or novice. It is mainly due to the volatility of the markets.
 

While finding a strategy that is right every time is nearly impossible, it is essential to accept that every trader will be going through trial and error, and eventually come up with a convenient strategy.

10. Copy trading makes you successful
 

Being a successful trader involves developing your trading strategy while connecting and learning from other successful traders.
 

The best traders learn from their mistakes, and work towards refining their strategies. While copy trading is not necessarily a bad strategy to follow, it doesn’t automatically make you successful either.
 

What Does This Mean For BitDelta Traders
 

Before investing or trading in any financial marketplace like FX markets, it is always recommended to do your research and understand how the market works.
 

This is because the financial market is full of myths that can instil various emotions amongst traders while reducing their chances of succeeding.
 

We believe that by debunking these myths above, your journey in trading Forex will be more precise.

If you want to get started with Forex trading today, you can sign up to the BitDelta Exchange.