Forex trading is a global and highly lucrative market to trade in. According to recent estimates Forex has a daily turnover of over $5.3 trillion, making it the largest market in the world to trade in.
Despite such a global phenomenon, a number of wild myths and misconception exist in public minds about what Forex is and how to be successful at trading in Forex.
The best Forex brokers always educate themselves about the realities of the Forex market and avoid the following myths:
1. Forex is a ‘Get Rich Quick’ Platform:
This misconception is all too common among inexperienced traders. Best Forex brokers see this day-in-day-out, the misconception that Forex trading is easy and it is an easy way to make passive income.
People often read a couple of books on the subject, set up a Forex account and assume they can begin making big money instantly. Many newbie traders go as far as assuming that they will be able to live off of the income from the Forex trading the begin.
Many marketers to push their wares, either in training or research products often create unrealistic expectations in people about becoming financially independent by working a few minutes or an hour or two a day.
2. The Higher the Leverage, the Greater the Return:
The availability of large leverage in Forex account is not a new phenomenon, yet it remains the least understood thing among Forest traders.
Best Forex brokers will advise you to watch out for having too much leverage on your trades.
It is because although the potential rewards on the upside of high leverage are very profitable, most traders become blind to the idea that it also magnifies the risk associated with each up or down move with each pip.
3. The More Complex the Strategy, the More Money You Make:
There is an overwhelming misconception among Forex traders that complex strategy alone and technical is all they need to successfully make money in the Forex market.
While best Forex brokers know that blindly relying on complex strategy in Forex trading can sometimes render catastrophic results and can even doom your entire portfolio.
Old hands and best Forex brokers remember the storied fall of Long-Term Capital Management, a company that blindly believed in their complex trading algorithms and strategies, also known as “Absolute Return” trading strategy designed by master mathematicians and PhDs.
The strategy brought them an unbelievable return of 40% per year before dramatically tallying up losses of £3.3 billion.
The best forex brokers know that the key to profitability in Forex lies in operating efficiently in Forex markets via minimal fees, low trade-related latency and practicing structured money management. These strategies will provide healthier and more consistent returns than any sophisticated strategy.
4. The Forex Market is Rigged:
There is a consistent fear, myth or misconception in trader’s minds that Forex is rigged or is a giant scam against traders cooked up by the brokers.
It is true that there are always some bad apples in any group that taint the reputation of the entire flock, but the best Forex broker has the best overall interest of the market at heart.
How else could these many people trust a system to trade over $5 trillion every day? Yes, it is true that a Forex broker gets compensated via the bid-ask spread, which is the difference between the buying and the selling price, but this is clearly discussed with the clients before any trades are conducted.
5. You Need Lots of Money to Trade in Forex Markets:
Gone are the times when you need a minimum of a million dollars to begin trading on the Forex market. You need not be a large brokerage firm or international bank to be able to trade foreign exchange.
With the advanced computer technologies, you can now trade on forex in your PJs in your living room. You can even become a Forex trading services provider by becoming what they call a Forex white label service.
Forex brokerage accounts can now be opened for as little as $25 by anyone around the world. With the help of an adequate internet connection and little money, you can trade currencies online from literally anywhere in the world.
Conclusion
In conclusion, there are many myths and misconceptions about who can be a Forex trader and how to become successful at Forex trading, but the realities are starkly different from those misconceptions.
