As we’ve moved into the 21st century, forex trading has risen in popularity and attracted a growing number of traders from all over the globe. Although we would expect people to have a better understanding of forex thanks to the increased awareness, there’s actually a lot of confusion and several myths surrounding the subject. It can be difficult for new traders to decipher what is and isn’t true, considering that some of these myths are passed around as common knowledge and repeated often. Some of these false beliefs can even cost you to lose money! Below, we will debunk some of the most common myths you’ll hear about trading and shed light on any real facts that inspired them.
Myth #1: Trading is Only for Rich People
We’re more than happy to announce that this statement is actually the opposite of the truth. In fact, many brokers offer trading accounts that can be opened for less than $100. In some cases, brokers will allow you to open an account with $10 or less. So where did the myth that trading was strictly reserved for the rich come from? Those that can afford to make larger deposits can usually open better account types through brokers and there is potential to make more money when you have more money to invest. People also tend to assume that rich people have more resources available to learn to trade, as they can afford to attend college courses or pay for account managers, financial advisors, and training. In reality, you don’t have to have any of these things and everything you need to know can be learned online for free.
Myth #2: The Risk isn’t Worth it
Just like with any other investment, forex trading does carry a level of risk with no guarantee that you’ll make money. Many people have done so and gave up in the beginning, which likely contributes to the popularity of this rumor. In reality, trading offers a much more structured way to make money because you aren’t blindly rolling the dice and hoping for a win. Your trading decisions are based on real evidence and you can control the amount of money you’re risking on every trade by practicing effective risk management. Keep in mind that your knowledge of the markets and your trading plan also have a big effect on the results you’ll see and that many of the people who say trading isn’t worth it didn’t understand the markets fully or they went in risking way too much money from the start.
Myth #3: Trading More is Better
The concept that entering more trades would give you the opportunity to make more profits seems simple, but this isn’t the way it really works. If you overtrade your account, you run the risk of an overactive account, which is harder to keep up with. You could then become stressed out or anxious and begin making mistakes or forgetting to exit trades. Traders that use too many indicators on their charts often suffer from this problem as well. Keep in mind that some strategies do require trading more, but you should never take on more than you can actively manage.
Myth #4: Trading is Easy
Brokers have made it extremely easy to sign up for a trading account these days by only asking for a few personal details (like name, email, phone number, address, and country of residence) alongside low deposit requirements. If you want to open a trading account, you can literally do so in minutes. Unfortunately, the simplicity we mentioned leads many beginners to think that trading must be easy since it’s so easy to get started. In reality, you need to invest a lot of time and knowledge into researching various trading topics in order to be truly ready. It’s true that trading is something that most people can do successfully if they invest the proper time and effort into it, but many people believe the misconception that it is a quick and easy way to get rich and aren’t willing to put in the effort needed, so they lose their money and abandon their trading accounts.
Myth #5: The Forex Market is Rigged Against Traders
Some people believe that you can’t make money trading forex because big banks and governments rig the market, or that brokers change and influence data to make you lose. In reality, the value of a currency is influenced by entities like banks and governments, but this is caused by inflation rates, interest rates, unemployment rates, elections, and other matters that just happen to affect the market. It isn’t actually possible for brokers to rig the market against traders either, as the forex market is too volatile and liquid to be rigged. In some cases, traders lose money at their own fault and want to blame their broker or say that the market is rigged to help their ego, even though this isn’t the case.
Myth #6: You Need to Constantly Watch the Market
You don’t have to sit around in front of your computer screen 24/7 to be a successful forex trader. In fact, many people manage to work full-time jobs while trading on the side. You do need to spend some time looking at charts and analyzing data, but there are tools out there that can do this for you. For example, you could sign up to receive signals from a trusted signal provider in order to receive messages that tell you when you should enter a trade. Expert Advisors that trade for you are another shortcut that significantly reduces the amount of time you have to spend online looking at data.
Myth #7: Forex Trading is Just a Big Scam
The idea of trading is scary to some because it involves making an investment through a broker and withdrawing profits later on. They imagine that the broker might keep their funds and refuse to issue their withdrawals for made-up reasons or that they might never respond to them again once funds are requested. It’s true that there are some brokers out there that are scammers, but you can avoid these shady companies altogether by doing research on any company you’re considering and sticking with more popular options that have received online reviews from real traders. It also might help you to rest easy by knowing that many of these brokers are regulated by government agencies that hold them accountable and ensure that traders don’t have to deal with shady tactics.