Forex market is one of the most influential and biggest marketplaces across the globe.
What is it?
It is the foreign exchange (hence, the word “forex”) of one currency conversion into another, and it is a major player in the financial sector that affects the world economy to a great extent, depending mainly on the psychology of the mass traders.
For that reason, it can be a volatile market filled with rumors, speculations and ever-changing updates that can even throw the seasoned traders off, especially the newbies being mislead by greed, fear, excitement or pride.
Therefore, it is crucial that you understand how to decipher myths from realities of the forex market if you really want to be a successful trader.
We will highlight some famous myths regarding the forex market, as well as the reality about them So, let’s dive right into the forex shark tank.
Myth 1: A Shortcut Gold Mine to Riches
This is a common myth for those wanting to jump into forex in the first place…
The market does allow the individuals to trade for a desired period (either long term or short term) depending on personal preference, but the trading does not come easy. Because forex has this specialty to provide freedom to trade for a desired period, a majority of folks believe forex is a shortcut to be rich in no time.
No doubt, forex has its advantages that other financial markets do not have, but it does not mean you should trade to your heart’s content as each trade always accompanies some risk of loss.
A good trader will never approach forex as a fly-by-night strategy to earn huge revenue in short duration of time, then disappear from the market as quickly as possible. The aim is profit through consecutive milestones.
Thus, don’t consider it a place to get rich with little efforts overnight.
Myth 2: Only Beneficial in Short-Term Trading
In reality, traders have to realize that the market is not solely meant for short-term trading but like an investment to grow for long-term trading as well.
If we talk about long-term forex trading, it is much safer and more rewarding than the short-term. In every financial market, the prices usually depend on the biggest market trends at that time. In other words, we can find a common dominator in price flow in a certain direction only during the long run.
So, if you trade following that price pattern and its direction, there are high chances for you to make a good profit out of it. On the contrary, in short-term forex trading, price movements are usually uneven and temporary, which is certainly not good for investment.
Think for the entire forest and not just the tree in front of you.
Myth 3: Forex is a Manipulated Market
The forex market is not supervised or run by a regulators and it does not have a physical establishment. Thus, many people believe that forex is a manipulated market where everything is predetermined to the point of even being a complete scam.
The reality is, there is no financial institution that has that kind of power to manipulate this market. As far as forex is concerned, it is the largest financial market across the globe with hundreds of traders and brokers associated to it.
It is understandable to blame the market and call it manipulated when losing money in it, but remember, this is a huge competitive market and if any entity is actually involved in a big scam, then there will always be those oppositions on the other side who will crop up to intervene, exposing and ceasing it because when it comes to money, nobody likes to be taken advantage of, especially when it’s the other side’s money involved.
Obviously there are those bad apples who attempt to game the market, but they usually don’t get far.
Just always stay on top of the industry with the latest scams, and you’ll be in good hands.
Myth 4: 100% Accuracy is Possible with Forex’s Currency Nature
This should be a no-brainer, but there are novices who get way too comfortable in the market. As with any financial trading, never assume certainty for you won’t be right all time, even with forex’s obvious numeric currency value that is contrasted to a normal stock’s value basing subjectively on supply and demand.
Be prepared for losses, as you will win some and lose some. Nevertheless, always be ready to count your losses if you ever want to win in this market.
Thus, regardless if you are an expert financial analyst, don’t ever assume over 70 percent accuracy.
Myth 5: The Market Will Turn Around Due to Forecast Prediction
Believing this myth can prove to be a highly dangerous move for you.
There have been countless traders who would forecast the movements of the market and when these forecasts failed, they continued to stubbornly believed that the market would eventually turn around in their forecasted favor, turning a blind eye and violating the simplest rules of trading just to favor some prediction.
On the other hand, smart traders don’t believe in these forecasts and only prefer reacting to how the market responds and where it will flow next.
You can discover the next period of movements where they will go next just by following major market trends.
Final Note
Now there you have it, dispelling the myths and revealing the reality of the forex market that every trader should be aware of to survive and strive in this business. Simply knowing these things can reduce your risk in trading and make you as much money as you want.
ABOUT THE AUTHOR:
Jake Smith is professionally a marketing manager and blogger by hobby. Currently he is working with Team Intrexium, which help individuals to choose the right business platform with Fortunity Alliance Network. He has five years of experience in Forex Trading. Jake loves to share his knowledge and experience with others on the web.