There is an increasing amount of discussions, articles, forum and blog posts related to forex, however not all of them should be taken seriously. Always keep in mind that maybe behind a post that talks about “automated trading software with 100% profits and no losses” (aka, the so called always winning Holy Grail) is a hidden agenda to convince you (an inexperienced and naive novice trader) to buy that software in question at all cost!
We have all seen and read the witty and convincing posts (maybe even with screenshots of charts, trading history or even payment checks) that promise an automatic solution to all of your trading problems and headaches for just $29.99. Of course, $30 is nothing compared to all those millions of dollars you will be making starting from tomorrow, right?!
Well, no… not exactly. The only one who is making millions is the owner or the so-called Holy Grail. Do the math – how many of us think that $30 is not a big sum to pay for something as genius as automated software? How many people will fall for “300% return profit in just one week”? How many of us will pay in hopes that next week we can all fly in business class to Bahamas for the second honeymoon?!
Now that I have pointed out that there are unrealistic fantasy stories around forex, let’s go over a list of facts and fiction:
1. Experts and Gurus are Always Right
First of all, every trader is different, so taking offer some guru technique will not do you any good. If you want to be successful in trading, you will have to figure out your own way. But here is something that will make you feel better – there is no complex, superstar courses or perfect trading strategy. Whoever tries to convince you otherwise is just trying to sell you their unexciting “magic power” for unrealistic prices.
If you want to trade like a pro, you will have to practice forex on your own skin and figure it out on your own. The only way you will succeed in this market is by making your own mistakes and learning from them.
2. Day Trading Makes Money
What’s wrong with day trading anyway? Let’s start with the term “day” – since forex market yields a certain long-term trends, any movements during the 24-hour span is considered random. This means that when you are day trading, you basically guessing.
Another thing related to day trading is the commissions (aka bid/ask spreads) that brokers receive for every single trade. This means, first of all, that there is no such things as no-commission brokers (they are getting paid quite well, believe me!) and, secondly, every time you change your positions, you will pay for it.
3. Don’t Stop Trading – You Might Miss an Opportunity
While forex market is open 24/7, it doesn’t mean that you need to stay in front of your computer every day, all day long. In fact, a professional trader doesn’t take every opportunity the market presents, and doesn’t trade every single day. Sometimes it is important to just wait it out or get out of the market completely. Forex is not only about investment opportunities, but also about money management and that means protecting your existing capital from the possible loss. That can hardly be achieved if you are always in the market.
4. The More Currencies – The Better
As a forex beginner you should stay away from overwhelming yourself with too much information. Trading several currency pairs is very time-consuming and much more complicated than focusing on just one pair.
5. Stop-Loss are Only for Beginners
Stop-loss should be used by every trader, no matter how much experience he or she has. This is a great way to minimize the possible losses involved in trading, so use it without thinking twice.
6. Demo Accounts are the Same as Live Accounts
Demo accounts are a way to practice and somewhat figure out how to use the trading platform, however don’t be too shocked when your strategy, which worked perfectly on demo account, suddenly doesn’t work at all with real-money trading. My advice – use demo account to get to know the platform, where to click and how to press in order to make it work. The real practice, though, can only be in the real world, with real losses, profits and need of discipline.
7. Complex Strategies are the Best
Who said complex makes perfect? You don’t need to be an Einstein to come up with a profitable strategy. You don’t need to use all available indicators and all available technical and fundamental analysis out there. You have to realize that the abundant amount of information will probably just make you even more confused. In fact, too many indicators will most probably ruin your strategy. Stick to couple of indicators and develop your strategy according to the results.
8. Forex is a Scam
Forex is not a scam (although, like in every industry scam is luring and trying to bit you in the ass). Forex industry is becoming more and more regulated and low abiding. The only scam out there are useless forex books, “guru” strategies and trading system, guaranteed 400% return software, unreliable brokers etc. As mentioned in the beginning of this article, the scam is everything with words “holy grail”, “perfect” and “100% return” in it, so be careful!
To summarize, avoid the misconceptions by learning everything there is to learn about forex. Take it slow, don’t try to complicate things and accept losses as a small fee for experience and therefore, eventually, success.