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Six Seriously Damaging Misconceptions About Forex Trading

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Have you ever seen a flashy video, ad, or website where forex trading is promoted by a billionaire? The luxurious lifestyle of a successful forex trader isn’t always as luxurious as it’s made out to be. This isn’t to say that trading can’t make you a great deal of money or help you become rich because it can. Unfortunately, however, there are some misconceptions out there that throw many beginners in the wrong direction. If you start with unrealistic expectations, you are likely to feel disappointed.

Thinking You’ll Get Rich Quick

The amount of money you make depends on many factors: your trading knowledge, strategy, how much money you invest, the leverage you use, your broker’s fees, how often you trade, and so on. You should know that it does take time for your money to add up, especially if you’re starting out with a smaller investment. Think about how many people would take up trading if it were that easy to get rich. The truth is that many people just don’t want to dedicate the time and don’t have the patience to stick with it in the beginning before profits become significant.

That You Can Start Immediately

Some people might see one of those flashy ads we mentioned and make an immediate decision to open a trading account. There’s nothing wrong with feeling inspired, however, you certainly aren’t prepared to trade from a whim. You need to invest time into educating yourself about trading first, no matter how eager you are to get started.

That it’s Better to Risk More

When one is gambling, they might make the decision to risk more because it can lead to a larger gain. Of course, you can also suffer a big loss. Forex trading and gambling are similar in this respect, but it’s better to risk less when you’re trading. Although you will base your trades on something, like fundamental or technical analysis, the market is still unpredictable. If you risk less, you might not earn as much, but you will also avoid wiping out your account. 

The More Leverage the Better

Different brokers offer different leverage caps. Some regulators restrict the cap to 1:30, while others offer much more flexible leverage options of 1:300 and higher, even up to 1:1000 or more. Since leverage increases your buying power, it’s a common misconception that more leverage is better. On the contrary, leverage can actually cause significant losses, especially for beginners that don’t have much experience. Stick with lower options unless you’re a seasoned trader that has a lot of money to gamble with.

That Trading is Fun

To be honest, trading can be quite boring. Many hours are spent in front of a screen waiting for a good move, and you may have days where you barely do anything at all. You might have a misconception about the life of a forex trader from movies that depict the fast-paced action on Wall Street, but this just isn’t the case for traders working from home. On the bright side, trading does offer some advantages, like the ability to work from anywhere with an internet connection. 

That you Need a Lot of Money to Get Started

Some might think that trading forex is not within their reach because they just don’t have a lot of money to invest. It’s true that the more you invest, the more you can make, but this doesn’t mean that you can’t get started with a small amount of money. Many brokers even offer special accounts that will allow you to get started with $5 or so. This misconception doesn’t end trading careers, it stops them before they start. Never be ashamed to invest in your future, even if your first investment is only a few dollars.

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