Forex is an incredibly complex beast, there is so much information out there. Unfortunately, a lot of the information being thrown around is not exactly correct, it is not exactly true. Due to this, there are a lot of misconceptions as to what trading is, what forex is, and what is actually involved in the process of trading forex. We are going to be looking at some of the misconceptions that are out there about forex and why they aren’t true.
Trading is gambling.
This is one that a lot of people that do not really have an understanding of trading think. Due to them not knowing what is going on behind the curtains, they see trading as a 50/50 chance, either the markets will go up or then they will go down. You will place your money on one and hope. While in reality it is far more complicated and it is far less of a 50/50 gamble. Trading forex is all about probabilities, you need to analyze everything about the markets and even the real world. Each bit of information that you look at will move the probability meter up or down, eventually, it will sit in one corner, which is what you will trade. Of course, it is still not that easy, you set up your strategy to protect your account, you limit your losses while increasing your profits, so even with a loss, you will still end up profitable in the long run. Trading is certainly not gambling, even if it looks that way on the outside.
It’s easy to double your money.
If you go on any sort of social media, you will probably see people posting how they can double your money overnight or that they can get you some ridiculous terms, tempting right? Yes, but it shouldn’t be, as those people are either massively exaggerating their returns or they are simply out there to take your money, both of which you should avoid. Yes, you can make money, a lot of money, but it is not easy, and doubling your money is one of the hardest things to do, once you achieve it things get a lot easier, but getting it is hard, many many traders lose thor initial deposits trying, so while it is possible, it certainly is not easy, and certainly not quick.
Leverage can make you rich.
Leverage can certainly help in the quest to make you rich, but it certainly won’t do it on its own, and if you use it wrong, it will make you poor long before it makes you rich. Leverage lets you use some of the broker’s money in order to trade larger trades that you otherwise would have been able to. So with a 100:1 leverage, a $100 account could trade as if it was a $10,000 account. So you can place larger trades, unfortunately, it also means that while your profit potential is higher with the high trades, so is your loss potential, the markets will not need to move anywhere near as far in order for your account to blow. So ensure that you understand the leverage that you are using, and it is not a guaranteed way to make you extra money.
Broker bonuses are great.
Many brokers are now offering new clients bonus funds, these are extra funds that you can trade with on top of your deposit, some even state that you can withdraw it, sounds amazing, well not quite. More often than not, those bonus funds will come with some pretty hefty requirements, things like trading 10 lots per $1 in order to withdraw. So if you had a $100 bonus, you would need to trade 1,000 lots just to withdraw it, a feat that many expert trades do not do in a year. That is on the extreme side, but you get the drift. Those bonuses look good in principle, but they are more often than not just a tactic to get you drawn in with very little chance of ever actually withdrawing it.
You can predict the markets.
No, you can’t, it is as simple as that, the markets cannot be predicted, at least not completely. You can get a good idea of what the markets may do, with probabilities, news events, and so forth all pushing the markets in certain directions. What you cannot do though is a guarantee that the market will move in one direction or another. In fact, there have been many times where the news events have come out, they have indicated that the markets should cruise sharply, but instead they decided to fall. This proves the unpredictability of the markets and shows why they cannot be predicted. So if you think that you know the markets and that you understand how it moves, you will at some point, be in for a rather large shock.
You do not need stop losses.
You need to stop losses, it is as simple as that. Some traders say you don’t, some people say that certain strategies do not need them, but the truth is that you always need to stop losses, always. Theta r there to protect your account, without them a single trade can completely wipe out an account. They let you limit your losses and allow you to be profitable even with more losses than wins. Trust us when we say that you need to use stop losses, if you don’t eventually you will lose everything.
You can’t make money with trading.
Let’s be honest, if you could not make money with trading forex, why would there be so many people doing it and why would the markets even exist in the form that they do now? Of course, you can make money, in fact, you can make a lot of money, it is just hard. A lot of people who get into it will trade, find it difficult, lose some money and then simply brand it as a scam or state that it is impossible to make money, simply because they did not. Just because one person can’t, does not mean that another can’t either. England lost to Croatia, but that doesn’t mean that they can’t even beat them.
Brokers need to be regulated.
You will hear many people telling you that the only barkers that you can trust are the regulated ones. While regulations do help in a way, they give you some additional protection when it comes to your funds, they don’t really do much more than that. In fact, there have been a lot of incidents in the past where regulated brokers have done some pretty shady things like manipulating the markets or refusing withdrawals, similarly, there have been a lot of unregulated brokers that have gone far and beyond what is expected of them to help their customers. So just because something is regulated, does not necessarily mean that it is better.
So those are 8 different misconceptions that a lot of people have about trading, we are sure that there are a lot more out there. There will always be people who are skeptical or who will reduce to believe even with the truth in front of them, they are not important. What is really important is that you understand what trading is, if you are doing well it doesn’t matter what others think or what others are doing, you are the important one so stick to your trading and go and be successful.