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Analyzing 5 Common Forex Trading Myths

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When it comes to trading, forex is the largest and most traded worldwide. Fact. There is an average turnover of around 5.3 trillion US dollars per day. Fact. The majority of forex trading takes place online, rather than on exchange floors. Fact. Check here for more fascinating facts about forex. Be you a seasoned trader or an untested novice; it is always worth knowing more about the market you are trading in. However…

You should also separate the facts from the fiction. If you're looking to try your hand at currency trading, you need to know what you are getting into. You don't need to be an expert at the very beginning, but neither should you start trading with false assumptions or myths circulated by others. A little bit of research is key, and even when you have been trading for a while, it is still good to stand back and reflect on what you know, or what you think you know about forex trading.

In this article, we will look at some of the common myths that are regularly perpetuated. No matter how much or how little experience you have with forex trading, you should still pay attention to the following. You stand greater success if you do.

Common myths around forex trading

#1: Forex trading is a way to get rich quickly

Sure, it is possible to get rich with forex trading, as is true with any kind of trading system. However, if you're looking to give up your job or career and become a full-time trader in a bid to make all of your financial dreams come true, then think again. Sure, forex trading offers you a wealth of options to help improve your chances. And with small margins and a higher leverage, there is some truth to the assumption that forex trading offers easy money. However, as with any kind of trading, success isn't going to happen overnight. If it did, many more people would become millionaires. There are no shortcuts. You need to research forex trading, practice on a demo account, and then take the time to learn the art of trading.

If you're unemployed or on a low-income, forex trading shouldn't be your escape from your financial struggle. Instead, consider training into a new career that offers you greater riches by going back to school or taking an online masters. View program here. Deal with any debts you have to lift you from your financial doldrums. And when you are financially able, then start forex trading alongside your career. This way, you have two avenues to help you find riches, though the same principle applies to each: be diligent and work hard!

#2: Forex trading is easy

Erm...no! Again, if forex trading was easy, we would see more people becoming millionaires. The reason that many forex traders don't is because trading currencies is a challenging endeavour. Sure, there are ways to simplify the experience. You can download trading software to automate processes, and you can learn the ropes with forex demo tools, but you still need to have some financial know-how. You need to have an understanding of world economics. You need to practice trading strategies, and even then, you need to be mindful of volatile exchange rates. Trading in currency is not straightforward, no matter what others lead you to believe. Currencies go up and down depending on geopolitical events, central bank announcements and other factors. There is a lot to learn, so you need to put the work in. Read books on trading, educate yourself on how to read the market, and consider finding a successful trader to mentor you in the fine art of forex trading.

#3: You need to have a large amount of money to trade

Back in those pre-internet days, only larger banks and other international financial institutions had the means to trade in the forex market. With thousands of dollars to play with, they had the means to see a high return on the amounts they put down. But those days are gone, and now forex trading is available to anybody. Thanks to the internet and the rise of online forex brokers, all you need is a computer, an internet connection, and a bank account that won't be jeopardised if losses are made. And while you stand a greater success of higher returns if you do put down the big bucks - we are talking thousands - you can still open a brokerage account with a moderate amount of money, usually as low as $25. Particularly for novice traders who lack experience, having the ability to put down a small amount of money is an excellent way to test the trading waters and gain the experience necessary for larger amounts later on.

#4: Forex traders need to watch the market around the clock

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Good luck with this one if you believe this myth. While the forex market is open 24/7, you don't (and indeed shouldn't) sit and watch your computer screen all of the time to make money. You would ruin both your eyesight and your sanity, and your family and employers wouldn't be very happy either! You can still make a reasonable income by allocating time at the end of the day to trade, or you could use an automated trading system to do some of the work for you while you're away from your computer.  You might also leave orders with your forex broker, or ask a fellow trading associate to keep an eye on the forex market for you. And you can even use an alert service on your phone to keep you up to date on any movements and trades. Any one of these methods is better than sitting glued to your computer screen 24 hours a day!

#5: Forex trading is a scam

Forex trading is simply exchanging one national currency for another. On a surface level then, this is no more a scam than when you exchange money for your groceries at your local supermarket. But still, as forex is an unregulated market, there are some people who will try and take advantage of the inexperienced. You need to be mindful of signal sellers, dishonest brokers, and dodgy forex management funds, each one of which is explained here. Forex trading itself isn't the problem, but rather the people who are behind the fraudulent activities designed to sucker the inexperienced novice of their money. If something seems too good to be true, then beware. Read our advice on choosing forex brokers; those people who have proven credentials to back up their services. Beware schemes you have little knowledge about. And don't hand over your money to any 'skilled investor' promising to make you millions, as you may end up in the hands of a trickster. And if you're somebody who thinks the market is rigged because you make too many losses on your trades, know that the culprit is probably you and your lack of education, rather than a corrupt broker or a dodgy government.

Finally

We can all become prone to the odd misconception here and there, but where your money is concerned, you need to take care. Believing forex trading is easy, or that it is a quick way to make your fortune are two myths that could signal your financial downfall. As with most things in life, the onus is on you to operate wisdom. Research more about forex trading online, and separate fact from any fiction. Speak to experienced traders with proven credentials. And do anything else to educate yourself on the forex market. You might then be on your way to experiencing success through trading.

 

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