Common Myths in Forex Trading
Capital turnover in the forex market is billions of U.S. dollars per day makes it the largest in market the world. Total capital and the number actors involved grow from time to time ranging from retail traders, brokers, banks, institutions to other big players. Trading in the forex market carries a relatively high risk. What makes it interesting is the forex market trading schedule: the time from Sunday night to Saturday morning, and the possibility to trade can from all over the world with the support of online technology.
Trading in the forex market can generate a profit starting from tens to hundreds of percents per day, but can also lead to loss of funds of the same amount. Based on that, some myths arose along with misunderstanding of the concept of trading in the forex market.These common myths are:
1. You have to be an economist to trade in the forex market
This is not true. To turn this myth from another point, do economists have to be professional traders? Majority of them tend to be observers or analysts. Professionals working in banks and large financial institutions come from different educational backgrounds and sometimes are not related to economics. Professional forex traders often do not have an economic educational background .
Key contributing factor to the success of a forex trader is the speed of respond to changes in the market, correct application of risk management strategy and a strong perception of the direction of the price movement of the market. What's interesting about this is usually obtained by self-taught people and through practice and is not given formally in economic education institutions.
2. You need a big capital to jump in the Forex market
As of today, a large capital for forex trading is no longer a requirement. You many know that a lot of broker companies offer mini, micro and even nano accounts, which you can use starting from $1, and some brokers even provide capital for free. Around 20 years ago, only banks and large financial institutions or fund managers with substantial funds could enter the forex market, but development of on-line technology and tough competition made brokers soften entry requirements for participation in the forex market.
So it can be considered an ancient myth, which no longer matters today .
3. Trading in the forex market is easy
Yes, it is easy to download and install trading platform, especially with the usage of robot setup program. However, trading in the forex market with real money and generateing consistent profit is not an easy thing to do. Professional traders get years to become familiar with the ups and downs of the market and develop trading systems. Not only the factor of trading system matter, emotional control is the most difficult thing to do, it takes quite a long time to train.
This myth can be applied to those, who have never been in a real waterfall of the forex market .
4. You have to monitor the market for 24 hours a day
This assumption may be true for the situation 30 years ago, in which the trader had to conduct transactions through session and monitor the time, when to open or close a position. Traders were stick to monitoring price movements to determine the status of their position. However, growth of modern Intenet technologies today let your trading run in online mode; you can entry and exit at any time without interaction with a broker. In addition, a variety of facilities such as pending orders, stop loss, trailing stop and profit targets makes you flexible in trading and releases you from the necessity to monitor computer screen continuously.
We have to conclude that 24-hours' monitoring of the market is a myth or describes the situation in the past, when market had to be monitored on a permanent basis.