Nowadays, fore trading is considered an excellent way for retail traders to get started in trading other types of financial instruments. Whether you are someone who knows a lot about forex trading or not, there are still plenty of myths that persist regarding this topic. These ideas can potentially affect people (for better or for worse), regardless of if they are novices or seasoned traders. While it will take a long time to dispel these myths, by learning about some of the major misconceptions, traders can be better educated regarding the realities of forex trading. Here, we explain these common myths and hopefully help those who want to try out forex trading in Australia.
The market is rigged
Most traders that end up incurring a lot of losses often blame corrupt brokers or a rigged market as the reason for failing. Although this may be an easy assumption to believe, this is actually not true at all. While fraud occasionally does occur in the forex market and other markets like the stock market, this does not mean that every trade that happens is illegal.
Also read: A comprehensive Guide to Online stock trading for beginners!
As a matter of fact, the forex market boasts one of the largest markets in the world, with thousands of transactions happening each day. Even governments and large reputable companies trade currencies on a daily basis. In fact, the forex market is also one of the most liquid markets in the world – which makes it difficult to be rigged. Therefore, it is a legitimate market that you can tap into if you know how. If someone takes a unique approach to forex trading, it is also highly likely that other participants will notice – such is the way of every market out there.
You can do well every time
When it comes to trading, this is simply not true, even if you are an experienced trader. Losses are just a natural happenstance when trading in any market. Attempting to find a ‘correct’ strategy so you never risk losses will either leave you on the sidelines or result in you not adapting to changing market conditions. As such, it is best you accept that losses naturally occur, and find a strategy that gives you a slight edge in the forex market. This should be enough for traders to do well in forex trading.
You can predict the market
While most novices believe this to be true, trying to predict how the forex market will go tends to lead to a trader’s downfall. As experts say, predicting the market can cause tunnel vision or psychological bias towards a certain position rather than looking at it objectively. To do well in forex trading, traders must be flexible, and nimble, and trade according to a strategy or goal. Ultimately, it is the volatile market that will dictate what kind of trades are made. So, if someone predicts something will happen, a smart trader should wait for the market to move and confirm whether the prediction is correct. Traders should train themselves to always be alert to market fluctuations and read up on current events that may impact the forex market.
The more complex a strategy is, the better
When it comes to trading forex for the first time, less is sometimes more. Most beginner traders tend to start out with a simple strategy. However, most of them assume that if they make their strategy more complex by tweaking more variables, they will see more returns. This is not usually true. Complexity is not always better. While there are occasions where complicated strategies can bring huge rewards, this rarely happens in reality. In fact, it can actually be more difficult to execute and maintain a complicated strategy in comparison to a simple one.
Most traders who wish to continuously do well in trading should stick to simple strategies. In fact, tweaking strategies may be detrimental to your overall bottom line and increase your risk of trading.
Follow what others are doing
The good thing about getting into trading forex is that there are a lot of tutorials and advice out there for you to educate yourselves on. For instance, you can easily research how to trade, what to trade, and when to trade. That being said, traders need to take into account their own financial situation and goals to pick the advice that is best suited to them. They should also attempt to boost their own trading skills so they can apply them to their own trades without needing to purely rely on others all the time.
Always be sure to double-check and reference information and advice you find because not every piece of advice is equal. Do not dive into something without fully understanding its nuances and details first!
You need to be an expert in economics
On the other hand, there are a few myths that suggest that only those with high-level economics degrees should trade forex. This is false. In fact, forex trading is becoming more assessable than ever, and this sentiment only serves to gatekeep up-and-coming forex traders. While a basic understanding of economics and how the market works is definitely helpful, you can research this information in your own time. You do not necessarily need an economics degree to know how to trade forex.
One way to learn more about forex trading is through talking with other traders and sharing knowledge. For instance, there are plenty of online forums and chat boxes that you can lurk or participate in. In fact, most traders tend to have less than three years of experience – so you most likely will not be the odd one out!
Forex trading is easy
This is a popular and common myth regarding forex trading. While it is somewhat true that information is widely accessible and it is possible to self-teach yourself how to trade, forex trading is slightly more complicated than that. Trading is not as simple as it looks. So, if you are thinking you will automatically make good trades once you enter the market, you may be in for a real shock! It takes a lot of time and effort to understand how the forex market works and how to take advantage of its volatility to make winning trades.