A lot of people, ordinary people, and businessmen are drawn into Forex trading because of the promising advantages it offers. Forex is considered the best market for traders because, in terms of size, accessibility, liquidity, volatility, and profitability, it surely is a cut above the rest! Requirements to become a Forex trader are not so complicated. Transaction costs to trade and to keep trading are low. You can trade various currencies anytime, anywhere. These and more reasons make Forex trading well-received and well-loved by numerous countries all across the globe.
Notwithstanding the known benefits of Forex trading, still, there are people who are not fully convinced and who think negatively of it. That’s often because of the myths created and attached to them. Just like in anything, where false notions exist, doubts, and wrong actions. Because of these myths, some potential traders, beginner traders, and even long-time traders are affected in one way or another.
Acknowledging the presence of fallacies about Forex trading is important to watch out for them, so you won’t be on the sinking side of the boat. In that way, you can enter Forex worry-free and can trade correctly.
Be aware and be enlightened. Know the truth behind the misinterpretations in Forex trading.
Here are 8 Forex trading misconceptions debunked!
1 – “Forex trading is a form of gambling.”
Let’s go straight to the most popular mistake when defining what Forex trading is. A lot of people think that Forex trading is a form of gambling.
This is the biggest misconception that makes a lot of people think that Forex trading is bad. Some even think that it’s supposed to be banned and tagged illegally. Non Forex traders commonly have these assumptions because truth be told, it seems like gambling when you don’t know what trading really is. What’s more, if you’re somebody who never believes in the genuinity of these industries, you will really carry this view. This is also the same myth that leads some people, who seem interested in trading, to back out.
Their difference might be considered slight, but there’s still a determinative difference that sets apart Forex trading from gambling. When you gamble, you simply make a bet without any practice and planning, without any rational backing. You rely on pure luck, so you’re merely taking a total shot in the dark.
On the other hand, when you trade Forex, you can’t baselessly guess and just let luck do its thing! You need technical comprehension and analysis of Forex to succeed! You utilize an evaluated risk with a possibility of loss. Forex trading is speculating a final result through well-planned strategies and assessment. Forex trading is not gambling.
2 – “Forex trading is a scam.”
When traders lose and can’t accept their loss, some think that they were scammed. Some think that Forex trading is a corrupt network. That’s when the misbelief “Forex trading is a scam” enters the peaceful picture.
While there are wicked humans who scam people with tremendous false offers, taking advantage of these people’s desire to join the Forex market, Forex trading has nothing to do with these scammers! Forex trading is not a scam.
Take note that Forex is the biggest market in the world with reputable corporations and governments successfully trading currencies for international transactions. It is apparently trusted by many. This obviously proves Forex trading’s unsurpassed credibility. It is used all over the world, so you can be sure that it works as needed.
3 – “You must have an academic background in Economics to trade Forex.”
Doing research and being updated with current economic news are both important in Forex trading. Having a basic understanding of economic terms will give you an edge, but it’s not really necessary to carry a degree in Economics to trade Forex. It’s alright to have an academic background in any field if you want to enter Forex trading, as long as you are willing to learn and to trade according to what you correctly learn.
4 – “Trade Forex, and become instantly rich!”
The objective of advertising is to attract people to believe and to act as the advertisements invite! Typically, because of the marketing styles used in them, some people are caused to think that Forex trading will make you rich in an instant, but this is really not true. Although everyone hopes so, you don’t become a same-day millionaire when you trade Forex. It’s a long quest requiring diligence and consistency in every trade you make.
Even though Forex is the wealthiest financial market in the world, it does not assure anyone to quickly profit and prosper. Forex trading must be understood fully well. There are various processes to undergo before you can actually digest and learn by heart how to trade Forex. You can’t be in a hurry about getting rich here because that’s just a daydream.
5 – “You need a huge deposit to begin trading Forex.”
Forex trading is famous among aspiring traders because trader qualifications are hassle-free, and costs to make transactions are low. Even with a small amount of money, you can deposit to begin trading Forex.
Many traders who started with a little deposit amount are trading and profiting more than their dreams today! Don’t worry because your small seeds can eventually result in big harvests! That is as long as you are persistent, wise and determined to succeed in Forex trading.
6 – “Forex trading is easy.”
A lot of people get disappointed when they enter Forex trading and find out that it takes some time and loads of effort to triumph. That’s because they thought that Forex trading was easy.
While people who are inviting you to trade Forex might overstate some things and exaggerate the simplicity of Forex, you should understand that Forex trading is not quick and simple. Some would tell you that you just need a trading application and a good Forex broker, but Forex trading is beyond that. You need to educate yourself first about the industry before you get into the specific facets and before you do your trades.
What’s more, your previous trading experiences will help you trade now and in the future. That means it may take you a lot of attempts before you completely get the hang of it or before you actually win. These and more prove that Forex trading is no joke. Of course, it has tremendous advantages, so you need to still work hard to earn them.
7 – “Prediction is the key.”
In Forex trading, there are fluctuations that traders don’t see coming, so being ready to react and respond is always a must! Prediction can be the grim reaper of trades. It leads to selectivity and can deform reasonable estimation. The market constantly shifts, so it should direct and influence the trades.
Trading predictions can sometimes be made. This is possible by scrutinizing the charts and identifying particular patterns that have transpired in the previous trades and hypothesizing they might materialize again. Nonetheless, for the most part, it’s rather the speed of reaction that makes a trader’s money instead of apprentice predictions which may or may not be true.
8 – “Just copy what other traders do.”
A wrong piece of advice is to just copy what other Forex traders do. It’s highly possible that their strategies may work for them but not for you. This is particularly because prices in the market actively move day by day.
This misconception leads a trader to fail when the trader he/she followed failed. Creating a trading plan is important for each trader. Through this, you use trading strategies according to your speculations from the analysis. Have your own techniques, and don’t just do what others do.
Especially if you’re just a newbie trader, you might be tempted to just imitate other traders without exactly knowing what you’re doing. If you do so, you won’t learn, and you might lose without putting up a good fight. Think smart, and don’t simply rely on others, so you can trade according to your own reliable knowledge and skills in trading Forex.
Well, of course, this type of trading may not be perfect at times and may not work similarly for different traders, but these myths are to be relied on. They are not true. Some of them may be true only for very rare situations and for very few people, thus they cannot be considered as complete truths as well.
Due to these Forex trading misconceptions, doubts and reluctance surface, leading people to fail their trades or to become unwilling and afraid to actually enter Forex. They hinder people to come up with the right trading resolutions and to garner the merits they are entitled to if only they knew they were being deceived by false notions.
ABOUT THE AUTHOR:
Nicole Ann Pore is a writer, an events host and a voice over artist. Quality and well-researched writing is her worthwhile avenue to enlighten and delight others about things that matter. She is a daytime writer for FP Markets, one of the leading forex brokers in the world. Nicole graduated Cum Laude from De La Salle University Manila, Philippines with a Bachelor’s Degree in Communication Arts.