The Foreign Exchange (Forex) market is the most significant global financial market. And the forex market isn’t just famous because of its global reach; it’s also popular because of its misconceptions. Like any other trade, forex trading also has certain myths that can attract newbie investors to believe the same. However, as a new investor, the investor must understand the difference between myths and reality of the forex market.
A few of these myths arose as a result of the way things were in the forex market before retail traders had access to online forex trading. Others are likely fabrications based on isolated incidents that aren’t reflective of the forex market as a whole. Finally, other mistakes have arisen due to misunderstandings of basic forex market concepts and procedures among persons less knowledgeable in this field.
We have covered some common myths of forex trading that have become rather popular among novice traders.
Trading in forex is easy.
The most prevalent of them is reading a book or two, and setting up a forex account makes you all ready for trading. But, unfortunately, you cannot learn forex through a book or two. Also, following the strategies of some self-proclaimed geniuses is not going to get you anywhere other than in losses.
Trading in forex requires a lot of things – understanding the market, learning about the trends, learning about each company, making an educated bet, analysis, and a lot of patience.
Forex is risky
Not just forex, every market has its risks. One shouldn’t enter a call just because there are risks. Unfortunately, the risk is everywhere these days. Of course, scams are also prevalent, but with proper guidance and proper understanding, you will not fall victim to forex scams with appropriate advice and knowledge.
And even if you do, there are firms out there who will help you against forex trading frauds. Many of these firms have a group consisting of lawyers, legal advisors, financial experts, compliance officers, and fund recovery agents who come together and devise a plan for catching hold of the scammer and recovering your money from them.
A finance/economics degree is required.
It is undeniable that foreign currency trading necessitates some knowledge of global finance and that having a basic understanding of economic ideas is beneficial when trading forex. However, to trade currencies, you do not need a master’s degree in economics or a thorough knowledge of all economic principles to trade currencies.
A wide range of educational backgrounds is represented among Forex traders. A solid head for statistics, insight to help you estimate where the market is headed, and the ability to respond fast to market-moving events are all required to be a successful forex trader.
Forex trading is nothing but gambling.
There is a common misconception that forex trading is a form of gambling. The illusion is based on the reality that there is no certainty in the FX market. On the other hand, the absence of confidence does not imply that traders are wagering money at a whim based on assumptions and forecasts.
Forex trading entails researching various economies throughout the world and their interactions. The lengthy movement of currency pairings, for example, is far from random and is impacted by global/national economics, refuting the idea that forex trading is gambling.
Trading Forex necessitates a large sum of money.
Surprisingly, this is one of the more modern-day FX trading myths that used to be more prevalent. When online forex trading was not available, retail forex traders had little access to the forex market unless they were very super-wealthy individuals who could trade amounts greater than $1,000,000 and were qualified enough to be granted a credit facility a banking institution.
With the introduction of online forex brokers, forex trading is now accessible to almost anybody with a modern computer, an Internet connection, and a small sum of money to invest.
Stable source of income
Forex trading is a profitable business that can be regarded as an investment. However, this does not imply that it is a consistent source of revenue. In addition, forex trading entails a significant amount of risk, and a trader can lose money at any time.
Watch the market 24 hours a day.
Whoever told you that you should watch the market 24 hours a day doesn’t understand the meaning of currency; yes, during the weekdays, the market is open 24 hours a day because traders worldwide should trade whenever convenient for them.
It is possible to trade FX while working a day or night job. In a day, all that is required is a basic understanding of the day’s market and some time to decide where to trade. To stay up with the market, you don’t need to spend all day in front of your computer or keep the app on your phone open.
Get rich quickly
A large number of short-term speculators enter the Forex market in the hopes of making quick money with little effort. But unfortunately, even in the world’s most affluent market, fast prosperity is uncommon. To learn to trade, you’ll need a lot of effort, as well as a lot of patience and consistency. In the world of foreign currency, the hasty gambler attitude rarely works. So if someone approaches you with a get-rich-quick scheme, make sure you check them up on the Securities and Futures Commission (SFC) website. Because there is no such thing as get-rich-quick, and it is nothing but a scam.
Invest intelligently by relying on facts rather than myths. A trader must conduct research and understand what currency trading entails; some of this will come from experience, and some will come from self-education.
Myths abound in the currency markets, hurting a trader’s chances of success or leading her wrong. Develop a sound trading strategy that has been tested and accept full responsibility for the plan’s success or failure; this will reduce or eliminate the myths’ effects.