No matter what stage you are at in your trading career, you will hear some lies about trading forex. And some of these myths are so pervasive that even some seasoned traders fall for them. While some of these misconceptions may have a kernel of truth, some are just completely false and most likely perpetrated by people who have a general dislike for the foreign exchange. In this article, we’re going to touch on some of the things people get terribly wrong about forex, as well as the truth behind these myths.
You Can Get Rich Quick Using Forex
Well yes, and no. While there is always the occasional wild story of some teenager turning a few hundred pounds into tens of thousands in a few months, these are far from the norm. And to make money fast with forex, you will usually need an account with a lot of funds already, or one that allows you to trade on margin.
The issue is that margin trading can be risky, and one simple mistake could put your account seriously in the red. Forex investing takes time and patience, and you can’t make tons of money on one single bet. Successful forex investors are consistent, have a clear strategy, and are in it for the long game.
It’s Only for Short Term Trading
While currency trading does favour short term trading, it is not the only way to make money on forex. Instead of making quick trades based on daily indicators and movement, you can also go for long term investments.
A currency is a lot like stock, but for a country, and it’s possible to spot economies that will garner a lot of foreign investment in the next few years or become main producers of a certain commodity that is in demand. Betting on long term trends also limits impulsive trading, and cuts the amount of money spent on spreads.
The Best Broker is the One with the Lowest Spread and Highest Margins
If you’re a beginner, the choice of platform will have a direct influence on your chances of success. This is why you have to look far beyond margins and spreads. You have to look at things like support, training and research tools, and an easy to use interface. The initial deposit should be low as well. If you’re looking for a great tool for beginners, check out this review of forex.com. You’ll learn everything from fees, customer service ratings, the tools it uses, and its reputation in the industry.
You Can Get Rich Trading the News
This is another major misconception that leads so many people into the market and leaves them disillusioned. Yes, major events can and will have an effect on daily gyrations. But capitalising on them is easier said than done.
First, you have to be able to get into trades at the right time. Second, it can be difficult to quantify how much of an effect this news can have, and fluctuations may be conflicting at the start. This could make it hard to get in a favourable decision, while others might leave positions that are losing on the surface, only to pick up steam later. Trading the news requires a lot of experience, a strategy, and in-depth analysis, so don’t expect it to be easy.
Forex can be a great way to make money, and is a great way for beginner investors to test the waters. Start small, learn as much as you can about the market, and try your hand at a good trading platform that will be forgiving and allow you to learn from your mistakes.