There are many myths about Forex that need to be left behind well in the past and here we will tell you exactly what these are because in reality there are many more myths than truths. In this article, we tell you everything! So let’s dive into the good, the bad, and the ugly.
The myths about Forex that circulate in the network do damage to this type of investment. Currency speculation has always been, especially in recent years, the victim of false news and rumors. In order to succeed in speculating or investing with this trade, investors need to leave behind these myths that affect the image of Forex and its expectations.
Forex gives monthly returns or interest.
Another false myth. As in the equity market, the return generated by the person investing in this product depends on the movements of the currencies the investor buys. In other words, profitability only depends on the fluctuation of prices, something that also happens with other investments (raw materials or stock markets, for example).
Forex is a pyramid.
Forex is an electronically controlled market where all foreign exchange transactions are carried out worldwide. Its usefulness is incalculable for international trade since it is in this place where the currency needed to pay or collect money from import or export products is bought or sold.
Forex makes you rich in a few hours.
Another falsehood. While it is true that anyone can access this market and accumulate strong profits in a short period of time, to invest in Forex and accumulate profits it is recommended to form in markets. That is, it is advisable to take a course to invest in a stock. With this course, we will be able to strengthen the knowledge we have and, on the other hand, learn more about Forex techniques.
Giving up our job to invest in Forex.
Investing in Forex does not mean giving up our job. We can test trading as a part-time job, at least entry, but never leave other sources of income and always learning from investment or currency speculation and receiving continuous training.
The intermediaries only want to con you.
From a few illegal experiences, many people think that the brokers who allow us to speculate on Forex are scammers. We must be clear that there are corrupt companies, but they are a clear minority. Forex is the largest market in the world, which has existed for many years.
There are two fundamental points that show why intermediaries don’t want to rip you off:
-Current licensing and regulation make it impossible for intermediaries to commit fraudulent activities. If you have opened an account with an authorized broker, the current regulations will protect your capital.
-Brokers earn money with the buy or sell spread. That is, they do not need to steal the investor’s capital to make a profit.
On Forex, you bet.
Forex trading is speculative, but to a certain extent: it is not a casino. The strategies and tools in this market are like those in the stock market. Forex traders have different trades, but they don’t work randomly. If an operation is carried out as if in a casino, this is the responsibility of each investor only.
I can make profits whenever I want if the Forex market is open 24 hours a day.
Again, you will not be sitting in front of your computer throughout the day to be able to operate for 24-hours. I would need automated trading software to take advantage of the 24-hour trading market.
I need to accurately predict the outcome of the market to succeed in Forex.
Unfortunately, there is no scientific method for us to have the knowledge of what is going to happen in advance on the market with 100% certainty. There would be no foreign exchange market if the exact exchange rates could be known in advance. Trading will never be an activity of certainties, but of probabilities. New traders tend to think in terms of odds, and this is one of the first things they learn and risk-reward relationships.
Many times you tend to think that you need to use an extremely complex strategy in order to succeed in Forex trading. It’s a popular myth that many online marketers want to create. The main requirement for success in Forex is self-discipline and money management. There are many traders who make profits consistently with simpler and older strategies.
A large amount of initial capital is required for Forex earnings.
A large capital investment will not help you with Forex. You don’t need much money to diversify into currencies and you can’t move exchange rates with your orders (you would need billions of dollars to do that). You can actually trade in forex with very little capital because forex trades are almost always leveraged with the money of the broker.
It’s a risky market.
One could say that it is a market with a lot of risks. The ability to leverage, or buy up to 100 times as much money as you have for investment and high volatility, or the sheer speed with which prices change every minute, can mean big losses to the investor.
The advice for those who decide to enter this market is to know the market before entering it, look for a broker’s platform, if someone will advise you to look well at the experience and set and respect the limits of loss per operation, by day, by week and by month.
Is completely legal.
Although it is not regulated, anyone can legally access Forex through a simple mechanism, looking for a broker. The recommendation, in this case, is to invest in a recognized broker, with trajectory, and use the formal channels to deposit the money to the account in which you will trade.
There Is No need to fear the Forex market.
Once we have established that it is possible to predict the market, why are there so many traders who, understanding and agreeing with this point, have trouble exploiting the market profitably? It is here that psychology is most useful. The trader should not be scared or afraid of not being able to win the market, as the market is changing, nor should he fall into despair because the trade he is waiting for right now seems unworkable, etc. The list of psychological problems that can be identified is quite long, and almost everyone identifies with fear or fear.
“Don’t be afraid of financial markets, just respect.”
The experience and knowledge of how they work will gradually turn us into traders with better mental control and more prepared to face any eventuality in our operation with total normality.
You can earn a lot, YES, but can you lose a lot? YES.
For example, if you open a new account with $10,000 in a broker that allows you to buy currency for 30 times more than you have in your account. Now buy 200.000 euros at a price of US$1.20 per euro, which is investing in total is US$240,000.
In this situation two possible scenarios may occur:
- The price of the euro grows to US$1.30. In that scenario, it would earn US$10,000, because it obtained a profit of US$0.1 for each euro it bought.
- The price of the euro drops to US$1.15. This is the side of history that no investor likes, but that usually happens to starters. In this scenario, I’d lose $5,000. And if you do this several times in the day, trying to make up for what you lost, chances are your account will be zero at the end.
The scenario that is illustrated, is something that usually happens on a daily basis in the Forex market. Then we already know the importance of learning and knowing how to choose an appropriate strategy to limit losses once a trade has taken place.