Published on August 28th, 2019 | by Sumit Bhowal0
3 of the Most Common Forex Misconceptions
Whichever way you look at it, the forex market is one of the biggest entities of its type in the world. It sees an estimated $5.3 trillion traded every single day, for example, whilst the worldwide marketplace is thought to be more than 2.5-times larger than the global GDP.
Whilst the foreign exchange may also be one of the most famous financial markets in the world, it’s also surrounded by a number of half-truths and surprising misconceptions.
In this article, we’ll look at three of the most common forex myths, whilst debunking these in full!
1. You Can be Right Every Time when Trading Forex
Whilst the advent of online trading platforms and advanced analytical tools may have made it easier than ever to access the forex market, this does not mean that you’re guaranteed to make winning trades every time.
In fact, the opposite is true, as even the most successful traders incur losses and occasionally see their strategies fail to deliver the desired rewards.
This is why tools such as stop-losses are so important to traders, as they enable individuals to cap potential losses and automatically close positions once they’ve reached a predetermined level of unprofitability.
Ultimately, a deterministic outlook will stand you in good stead as a forex trader, as you need to respect the underlying laws that govern change and the inevitability of occasional loss.
2. You can Easily Profit by Trading the News
Online trading platforms also offer access to detailed and real-time news updates, which offer opportunities to high-volume and day traders to achieve short-term and unexpected profits.
However, this requires a certain level of knowledge and comprehension, and it’s simply untrue to suggest that trading the news automatically enables you to reap significant rewards.
After all, news updates don’t boast the depth or detail of trading charts, whilst they generally don’t highlight the potential liquidity associated with specific trades or any influential trends.
So, it’s important to combine news updates with technical analysis, or risk making uninformed decisions that lose you money.
3. Predicting the Market is the way to Make Money
Whilst there may be some truth to this, sticking too closely to this rule can easily be the downfall of new or novice investors.
Remember, we touched earlier on the importance of determinism, as this enables you to analyse trends and market forecasts whilst also keeping the universal rules of forex investment in mind at all times.
This should be part of a comprehensive trading strategy, and one that combines both market analysis and instinct with a decisive mindset. This enables the market’s movements to dictate your trades, rather than trusting in vague and often incorrect predictions!