New forex traders and others who have been trading for some time need to be aware of the huge volume of inaccurate information on this subject. Not all the information and “100% effective” strategies provided online are true. Being able to distinguish between proven facts and falsehood will help you to avoid unnecessary risk and start off on a good foundation for success as a forex trader. That is why we are discussing 5 dangerous myths about the forex market.
1. There Are Forex Trading Strategies That Work All The Time
It is important to study and understand effective currency trading strategies. But you must bear in mind that all traders (including the most experienced) incur losses. That is why any attempt to find or develop a strategy that is foolproof and works all the time will be a futile exercise. Such a strategy will either make you a hesitant trader who remains endlessly on the sidelines or it will cause you to use a a strategy that cannot adapt to changing market conditions. One of the cardinal principles that you must accept about forex trading is that losses will happen. So you should adopt a strategy that will minimise your losses and give you an edge in the market conditions in which you are trading.
2. Complex Strategies Are Better
As a new trader, you will almost always start trading forex with a relatively simple strategy. This usually brings in a fairly small profit. But you should not follow the myth that a more complicated strategy will earn you a large profit in a short time. Instead, you should focus on obvious things like price movement and check whether the market is ranging or trending. Avoid the temptation to focus on precise reversal points and then make additional trades. Such predictions have led to colossal losses for novice traders. You must realise the profits in forex are marginal. The best traders simply make more than they lose. So once you have discovered a simple strategy that works in the markets where you trade, stick to it. Then concentrate on effective money management so that you can minimise your losses.
3. Simply Copying Other “Expert” Traders Can Make You Successful.
There are many self-acclaimed forex experts who cater to the needs and desires of retail forex traders. These experts provide a lot of information on what to trade, when to trade, and how to trade. However, it is very important to learn the basics of forex trading patiently and the skills required to succeed. Remember that ultimately, you are the one who will gain or lose when you use someone else’s wisdom. You don’t have to be in a hurry to use the strategies of the experts who promise quick results. Instead, you should use the opportunity provided by almost all brokers to do demo trading without using real money. This will help you to practise the expert’s strategies and discover if they work consistently without incurring any major losses.
4. Trading More Currency Pairs Will Earn You More Profit
Trading with a few currency pairs is almost always more profitable than trading with many more pairs. Although it seems logical to assume that if you make profit by trading once a day, you could make more money by trading 7 or 10 times a day; this is simply an illusion. Experience has shown that trading less often and concentrating on fewer currency pairs that you understand very well will offer you greater benefit. It is usually more profitable to wait for the best opportunities to trade in way you understand, no matter how few they may be.
5. You Can Get Rich Quickly By Trading Forex
It is possible to get caught in the web of savvy internet marketers who delight in raising the hopes of their target audience beyond realistic expectations. Many of these advertisers and copy writers simply want to sell their information products on forex to as many people as possible. So they present forex as a great part time or get rich quick money making opportunity. But in reality, it is quite difficult to make consistent profit in forex ( with minimal losses) without taking a long period of time to learn about the market and how it works. Although you can make a regular profit after you have studied and mastered certain trading strategies, it will definitely not be a get rich quick experience.
It is vital for you to do a lot of research and discover how forex trading actually works. You will also need to practice trading with a little capital using sound money management principles so that you can learn all the strategies that will enable you to minimise risk and become a successful forex trader.