5 Trading Myths Busted

Illustration: Currency

In recent years, as Forex has become more popular, a mythology has sprung up around the foreign exchange markets, mostly propagated by people who don’t really understand what they’re talking about ­ or worse, do understand what they’re talking about and deliberately mislead people. Here are a few of the popular myths busted.

A Successful Strategy is a Complicated One

Whilst it’s true that forex markets are complicated and at any one moment thousands of variables are in play, you don’t have to have a complicated strategy to succeed. Many successful traders use simple, old strategies and make consistent profits…the key is not so much the strategy, but being disciplined and having good money management.

To Make Money with Forex You Have to Predict the Future

This is an overly scientific approach to the markets, there is no way of telling what is going to happen next, so don’t get hung up about predicting the future. The key is to work out a strategy and stick to it, every strategy will give you incorrect signals, the difference between a good strategy and a bad one is simply that a good one will give you a lower percentage of incorrect signals.

If You Can Make Money on the Stock Market You Can in Forex

Whilst the graphs sometimes look the same, and you can often use similar analytical tools, it does not follow that if you are good with stocks you’ll be good with Forex trading. The key to both types of trading is knowing your markets, and quite simply, whilst knowledge in stocks might give you a broad background, it doesn’t teach you to deal with 24 hour stock patterns.

I Can Make Profit Whenever I Want Because Forex is 24 hours a Day

Whilst the markets are open all the time, experienced traders will tell you that you’re only likely to make a profit in certain, broad, windows. Whilst you might know a lot about how the markets react during western trading hours, there’s an entirely different set of factors at play when the eastern markets are in full swing, so it’s best to restrict yourself to smaller windows and learn how these react in certain situations.

I Need A Lot of Money to Trade Forex

Forex trading is almost always leveraged in some fashion, so you can trade with very small amounts of capital and get good returns. Of course, this means you can make significant losses without a lot of exposure, but that’s the risk you take when getting involved in forex trading. A large amount of capital is not required.

There are hundreds of other myths around Forex and the more you trade Forex, the more you’ll encounter them. Remember that the most important parts of Forex trading are: money management, discipline, and keeping a cool head. Everything else is superfluous.

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2 thoughts on “5 Trading Myths Busted”

  1. Quite agree a good overview, although I would say that I made the transition to Forex quite easily. It depends on your trading style and how you trade.

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