In this market, there is not an equilibrium between losers and winners. From a total of 100%, around 20% are winners, 10% are managing to keep themselves on breakeven and around 70% are thrown out of this market. These statistics have slightly changed during the last decade. The percentage of winners is rising every year that passes because this domain got awareness and traders educate themselves better and better.
Because of this imbalance between winners and losers, myths were born. Let us tell you what are the most common myths in trading Forex:
- Trading Forex means Easy Money
This is my favorite one and is also the most important reason why beginners are losing their money. Trading in the Forex Market necessitates knowledge, patience and will. It is just like any other business. A trader should first learn about the market and only after that he should invest. Usually, beginners are throwing themselves in the ocean without knowing how to swim.
- Leverage
After they have lost money, novice traders start blaming other things for their loss. One of these things is Leverage. It is true that leverage can contribute to larger losses. But this happens only if a trader does not realize that he is over exposed to the market with his account, or, even worse, if he doesn’t know how to / want to cut his losses. An experienced trader will always know when to get out of a losing trade or to adjust his volume so that he will not lose money.
- News and Information
These are also considered to be a factor which makes traders lose their money. After losing, traders believe that they did not have the right information for them to enter into a winning trade. But, actually, Banks or Investment Funds have access to the same information. The differences between a retail investor and a Bank or Investment Fund is the services through which they get the latest news. A paid service will provide you fast and real time access to the market news, while a free one will give you the same information but with a delay.
- Initial Balance
This is also a myth created by those who did not know how to correctly manage their money. Nowadays, it is said that if someone intends to enter the Forex Market with a small amount of money, they will have no chance. This myth is actually true only for those who do not know the market and who do not have a good money management, nor a trading strategy. A well prepared trader could trade very well with a balance of 100$ or one of 10.000$.
- Volatility is Bad
Have you ever heard ex-traders or someone sharing his/hers opinion regarding volatility? You will often hear that volatility is high on the Forex market and it is very bad for a trader. Well, let us tell you that volatility accompanied by leverage and a proper trading strategy is the best combination a Forex trader should look for. Volatility means that the market is active and it moves. Short term traders will always try to speculate the direction of the market in a volatile moment. In time, volatility strategies were developed and applied in such moments.
- Brokers work against you
We will end up with a half myth. It is true that in the past there were a lot of brokerage houses which were not ethical and contributed to clients loses. Now, when a trader is in a trade and loses his money, he would rather blame the brokerage house than admit his own fault. For a brokerage house to go against you it would have to change the quotations for the instruments you trade. If you suspect such action, you could easily compare the quotations with those from a commercial bank. It is normal to be slight differences, but not tens of pips.
These are the most important myths that we compiled for you to understand that this is a business, which implies risks, but there are also untruths about these risks.
The Information or materials published or submitted by Forex Rally are exclusively for educational, informative or analysis purposes and cannot be considered recommendations to purchasing/selling/keeping of a particular financial instruments. They are not and should not be treated as indications or tips on trading strategies for real or demo accounts. Forex Rally warns the Users/Clients that past performance of Financial Instruments is not an indicator of future performance. Forex Rally assumes no responsibility for the outcome of transactions based on or influenced by any of the above-mentioned information. Forex Rally warns that Financial Derivative Instruments are complex instruments and leveraged products that involve a high level of risk which can result in high losses, including the risk of losing the entire capital invested by the Client. Such instruments might not be suitable for all Clients. The Client should not engage in transactions with such Financial Instruments unless he/she understands and accepts the risks involved by trading Financial Instruments, taking into account his/her investment objectives and level of experience.
