The foreign exchange (Forex) market is an excellent place for ordinary people to dabble in trading. Forex is more liquidity than other markets. It also provides fantastic opportunities for profit. It’s accessible too. Trading costs are low, and you can trade anytime, anywhere. Anyone can have a go.
“But wait,” I hear you say. “Isn’t Forex trading for high-flying Wall Street types? Don’t you need a fortune already? They all drink champagne for breakfast and eat caviar for lunch, right?” These are just some of the misconceptions about Forex trading out there.
We’ll take a look at the top ten Forex trading myths and set the record straight. Let’s make like Adam Savage and Jamie Hyneman and bust some forex trading myths!
It’s more accessible than other markets, but Forex trading isn’t easy. Like anything worth doing, it requires time and effort. This can be off-putting for newcomers hoping to make a quick buck.
Take time to do some research and learn about Forex trading. Reading this is a good start. Make peace with your fear of losing and failure. It’s all a good experience and will help you become a more profitable trader. Like any skill, it takes practice.
Forex trading isn’t easy. It takes planning and practice to succeed.
At the opposite end of the scale, the prevalent forex trading myth says a high-level economics degree is required to trade. This is wrong. Forex trading is becoming increasingly accessible.
A basic understanding of economics is indeed beneficial. However, having degree-level expertise is not necessary to know what you need to trade in Forex. Hold recurring meetings with other traders to share knowledge. There’s certainly a lot to learn. The more you learn, the better equipped you’ll be. That stands to reason.
Forex is the biggest market in the world. It’s larger than the stock market and commodities markets. Most traders have less than three years of experience. It stands to reason that most traders aren’t seasoned veterans with a ton of expertise.
You don’t need to be an economist to be a Forex trader.
This forex trading myth could apply to almost any type of trading. But unfortunately, a lot of people unfairly assume that Forex trading is simply gambling. It’s a prejudice that comes from ignorance.
There’s an element of luck to just about any enterprise, and Forex trading is no different. What separates gambling from Forex trading is that gambling is pure luck. Yes, you can play the odds and make smarter bets, but it remains a game of chance.
Forex trading requires analysis and technical knowledge. Traders must plan properly and mitigate their risk as much as possible. Good money management is key. Cloud spend optimization, and other budgetary concerns need to be managed. If they act rationally, then they can make a profit. If they treat the market as a casino, then it is one.
Forex trading is speculative, but it isn’t gambling.
There are bad actors who like to use the Forex market to scam people. It’s undeniable. They prey on over-enthusiastic, inexperienced traders. This isn’t exclusive to Forex, however. Scammers target people interested in crypto or the stock market too. This isn’t a characteristic of Forex trading. The market suffers from con men just like any other.
This idea comes partly from traders who have made big losses and exited the market. They found they couldn’t cut it and so deflected by calling the whole thing a scam. They’ve decided that the system is corrupt, and they were never really going to be able to succeed.
Malign scammers sometimes exploit people interested in Forex trading, but the market is not a scam.
Hollywood has propagated the myth of the coke-addled, mega-rich, supercar driving trader. The best trading movies, like Wolf of Wall Street, are exaggerated for entertainment value. It’s not even about Forex traders. There have been, of course, real stories of excess across the finance sector. However, these are atypical examples and not indicative of the culture in Forex trading.
In truth, most Forex traders are not flush with cash. Traders shouldn’t expect to be making Quaalude and Lamborghini money.
Belief in this forex trading myth shows a total misunderstanding of trading on markets. Forex isn’t a savings product. It’s an investment that depends on the fluctuating prices of foreign currencies. A trader only profits if the value of their chosen currencies rises.
Currencies can go down in value, of course. So if you’re interested in Forex trading, you should prepare for potential losses. To make a profit, you’ll need a system. Like a logistics company that uses a warehouse management process, you’ll need a Forex trading process to thrive in the market.
Forex traders make a profit based on movements in the market. Investments don’t earn interest.
You may have seen advertisements from people extolling the virtues of Forex trading while standing in front of a Ferrari holding a wad of cash. They spin a yarn about how they became a millionaire overnight. This is misleading at best. At worst, it’s a sign of a scam artist at work.
No, Forex trading isn’t a get-rich-quick scheme. As we’ve already discussed, it requires research and work. It can provide a steady income for those willing to take the time to understand the market. It’s the world’s largest market, so there’s profit to be had. But don’t go into it expecting to make vast sums of money in your first year.
You may be trading as part of a team. Through the use of remote collaboration tools, you can gradually build your profits together.
Forex trading is not a get-rich-quick scheme. However, you can make a healthy living when you understand the market.
No, you won’t need a crystal ball to trade on the Forex market. Traders can see patterns emerge when they study the data. This can lead to investment choices designed to benefit from those patterns. Sometimes, those choices pay off. Sometimes, an unexpected market fluctuation can ruin a Forex trader.
It isn’t possible to predict the future. Indeed, there would be no market if it were. Success comes from understanding the probabilities and reacting rationally if things change. Traders make consistent profits when they manage their money properly. To optimize your marketing budget and use the safest strategies.
Forex traders can’t predict the future but understanding the probabilities leads to safer strategies.
Men account for 86.7% of Forex traders. Very few women are employed in the top roles. This is something of a historical hangover affecting most financial markets. Change is occurring, though.
That 12.4% that are not men are eager to use such tools, and studies have shown that female traders perform better than their male counterparts. It’s thought that this is thanks to women being less aggressive and more risk averse. They’re able to make more considered decisions and make more consistent profits as a result.
This is leading to financial institutions hiring more women traders. Such institutions crave stability in an increasingly unstable world. Diversifying their workforce leads to new strategies and more success.
Forex trading may be male-dominated, but the market is changing. Women are increasingly being hired as Forex traders and often perform better than men.
One trader’s strategy may not work for another. If you receive a voicemail from another trader offering advice, that advice may be out-of-date by the time you get it. Forex traders should find their own way of doing things in a fast-moving market. Indeed, if traders all followed each other, then bubbles could emerge in the market. Bubbles always pop.
This is especially tempting for new traders. If you’re new to Forex trading, you’re doing yourself a disservice by emulating other traders. Getting a feel for the market and growing your knowledge comes from forming your own strategies. You should create your own trading routine and get comfortable with it.
Success comes from finding your own way, not emulating others.
Forex traders need to find a process that works for them. Don’t allow forex trading myths and misconceptions to lead you astray. Whether you’re just starting out, working on a team, or a lone ranger, take what you’ve learned here to succeed on the Forex market.
Jenna Bunnell is the Senior Manager for Content Marketing at Dialpad Contact Center, an AI-incorporated cloud-hosted unified communications system that provides valuable call details for business owners and sales representatives. She is driven and passionate about communicating a brand’s design sensibility and visualizing how content can be presented in creative and comprehensive ways. Jenna Bunnell also published articles for domains such as SME News and Together Platform. Check out her LinkedIn profile.
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