Forex is the market for trading currency pairs. It is a real business that happens over the internet. However, many new traders do not take it seriously and often associate it with gambling. And this misconception still exists in the minds of people. Hence, it is necessary to fade these thoughts away as it could lead to significant losses in the long term.
Having that said, in this lesson, we shall discuss some of the myths and facts about the forex market, which are vital for traders to know.
Myths about the Forex Market
✗ Forex is a get-rich-quick scheme
Many traders enter into this market with the assumption that they can make quick profits consistently. They start off with a small capital do make quite a good amount of money. This entices them, and they begin to maximize their lot sizes. In the end, they lose all of their profits, including their capital in just one trade. So, do not ever enter the forex market, considering it to be a game of gambling as it can completely blow away your account within no time.
✗ Professional traders have an accuracy of 100% profitability
Whosoever be the trader, when they trade in the forex market, it is almost impossible to have only profitable trades. This is because; sometimes, there are events that happen to occur without the knowledge of the trader. And during these times, there is a high probability for the trade to go against your direction. So, the consistency of a successful trader is around 80-90%.
✗ Stop-losses are purposefully triggered by the broker
Many traders believe that their stop-losses are hunted by their broker. But, this is just a misconception in the minds of people. Note that brokers have absolutely nothing to do with your stop-loss. It is the market itself that hunts for your stop-loss.
✗ There exists ‘THE best strategy’ in trading
Many novice traders, in fact, all novice traders, go in search of the best strategy to trade. But, the truth is that the best strategy is not an absolute term. There are a countless number of strategies out there, and it all depends on you on how you adapt to it. Hence, there the concept of ‘best strategy’ is just a myth.
✗ You need to have a financial degree to trade in forex
Well, a great fact to know about the forex market is that you do not need any degree to qualify to trade. However, as we always say, education is definitely required for you to succeed in the market even though it is not a formal one.
✗ The price movements in the forex market are entirely random
Even though the forex market is extremely hard to predict, the price movements are not entirely random. There are different ways through which a trader can assess the conditions of these prices. With the help of Technical Analysis or statistical (quant) methods, a trader can moderately anticipate the price action of currency pairs and thereby they can have an edge in the market.
This brings us to the end of this lesson. We hope we’ve cleared out some of the misconceptions you had about the forex market. To have a recap to this lesson, we have a quiz set up for you below.