The foreign exchange market (forex, FX, or currency market ) is a global decentralized market for the trading of currencies.
The word âExchangeâ refers to any trading place for changing one kind of asset to another (stocks, futures trading etc.). Unfortunately, as in any other business there are both honest and dishonest companies. Due to the latter ones, there are a lot of myths, lies and tales about Forex in peopleâs mind which creates false perceptions of the financial markets for both novices and experienced traders. In this article we shall attempt to dispel these myths and prejudices so that you will be able to understand correctly the essence of the trading process in currency markets. Unfortunately, many traders who once used to be promising market players, have left trading forever, having believed in this false perception.
I. Forex is a mere lie.
We all know how gossip arises: âOne my friends told me how his friend was fooledâ¦â. Without fully understanding the situation and then making judgments based on such statements one could be forgiven for supposing that the Forex market is a lie. There are a lot of traders, especially novices, who invested a lot of money without having enough training or experience. Without sufficient knowledge and understanding of the trading processes, they are likely to lose their money fast. Afterwards, these people follow the standard ploy: they spread information about this âawfulâ Forex market disregarding the vital details of their lack of experience and knowledge of the markets. It is important to remember that there are a lot of people who are genuinely making or have already made money in the Forex market. However, this is the result of learning the system over many years, hard work, purposefulness and diligence.
II. I can make money in the Forex market fast and easy.
The high liquid Forex market opens immense possibilities for anyone who wants to attempt trading on the Forex Exchange. Consider this: the high number and variety of brokerage companies, materials for training and vast leverage which allow for returns far exceeding the traderâs deposit create an illusion of becoming extremely rich extremely quickly- just like in a fairy-tale. However, as is well-known, life is not a fairy-tale, and the stories of instant success conceal the fact of every day hardworking. In other words, itâs almost impossible to make money fast. But after you attain experience and knowledge, youâll soon be able to make profitable deals and good money.
III. In the Forex market people lose the shirt off their backs and their savings.
This myth belongs to the series âOne my friend gave his last shirt off his back in the Forex marketâ. Indeed, there are people who have lost large amounts in the Forex markets but it is important to remember that nobody forced them do what they did. If you follow this way of thinking, one can say that people draw on their savings for shops, restaurants and other entertainment. However, this is the conscious choice of the individual. The conclusion here is as follows: donât give your last shirt and donât make investments using banking loans and mortgaged property. Let your first steps in the Forex be small and well thought out. Donât be in a hurry: start with a small deposit and step by step you will be able to increase your fortune. Never risk what you cannot afford to lose and always carefully consider your next move.
IV. The Forex market is only good for short-term deals; itâs not a serious business.
In fact, in comparison with other financial markets, Forex is better suited for making short-term deals. However, itâs not worth focusing only on intraday trading or scalping strategies. After choosing a currency pair as an investment tool (as well as stocks, futures, or securities), you can then consider a long-term strategy and in such a way protect yourself from the market noise and deals based more on emotion. Moreover, if you keep in control of your emotions and have a target in terms of the profit you wish to achieve, you will more often than not achieve good results due to the long-term strategies.
V. Iâve found an ideal strategy.
As it well known, the Forex market is rather volatile, and this is good. However, price movements depend upon many factors. Due to these factors, there are moments when it is impossible to predict the state of the market, and a trader sooner or later will have to face losing some of his investment. This is the reality of the market and it is important that you understand this fact. For sure you can attempt some form of Forex-alchemy to find some âunbeatableâ strategy, but most probably your attempts will not be crowned with success. The best strategy is a comprehensive analysis of the world economic situation combined with different hedging techniques and tools. A good trader is a flexible trader.
VI. Itâs all under the control of the Forex market, and there is no sense in trying it.
After having failed in the currency market, some traders often try to justify their ill-considered deals or mistaken decisions by blaming brokerage companies and international banking operations of dishonesty and fraud. They are then, more often than not extremely keen to share their opinion with the whole world.
However, anyone can become a victim of fraud, and the Forex market is not an exception. However, traders must always consider their own financial safety and always apply common sense. If you donât want to become a victim of fraud, you firstly need to find a competent, honest Forex broker. Donât choose a broker based on advertising on the Internet, but make your decision based on your personal communications with a brokerage company, real customersâ feedback and the style of the brokerage company that you are considering. Letâs say that we are considering a STP-broker. This kind of a brokerage company is directly interested in your profit and will never let his customer lose money. In other words, take the smart approach, analyze information and thereby minimize your risks.
VII. I will only work with Bucket Shop brokerage companies -, as they have the highest leverage, donât charge fees and therefore offer the best return.
Bucket Shop brokerage companies can afford to offer attractive leverage. No fees and minimum requirements to a deposit attract Forex market novices in the best way possible. Unfortunately, not everyone understands that this leverage hides your own risks. STP-brokerage companies charge fees and make no secret about it as itâs the main source of their profit unlike Bucket Shops whose profit is based on your losses. Think about this very carefully.
VIII. The risks in the Forex market are too high. The game is not worth the risk.
The question regarding risks is not a simple one. Imagine that you have never invested your money (just as the risks in the Forex market are high, banks can also face crises, and if you invest in real estate, you can become a victim of a real estate developer). Let us assume that you just get your salary, live paycheck-to-paycheck and invest nothing. Do you think that you bear no risks? In reality you do; you can be fired, your company may become unable to pay your salary, or your money could even be stolen from your home. This only goes to show that, one way or another, we always bear risks no matter how we try to avoid them.
The Forex market as with any other business bears some risks. However our task is to minimize them.
What is better: to invest and increase your fortune or spend your income proving yourself that Forex bears too high a risk? The decision here is up to you. However you must remember: very few people in the world who genuinely make an effort to achieve their goals achieve nothing.
IÐ¥. News release trading is an easy way to make money.
There are a lot of experienced traders whose main strategy is to trade in news releases. This makes market novices follow more experienced colleagues. However, you should remember that the impact of the regular news releases cannot be always predicted for sure. The fundamental analysis as that any kind of forecast is just an opinion and not a 100 percent true fact.
It should be noted that graphs do not show the information immediately as there can be lack of liquidity. Moreover, the first movements can be false. To achieve success in trading news releases, you have to analyze the information you receive, open orders in time and use different financial tools.
X. The Forex market lives on its own.
Currency movements against each other depend upon the following factors: the policy of the influential banks, the state of economy, national conflicts, the unemployment rate, etc. If a trader doesnât take into account these factors and bases his decisions solely on a technical analysis, he risks bearing losses. Any significant event in the world can render your technical analysis worthless in no time at all. Consequently, the myth about the independency of the Forex market is a baseless one.
In our article we described the
most popular myths that have spread among novices in the financial markets
that you can always find your own way. You just need to see beyond your nose
and not to stop at what you have initially achieved.
Your friendâs way
is not your
. Donât try on someone elseâs failures and
donât close your eyes to the gains of successful traders.
to make your own conclusions and always be on the lookout look for good advice
If you decide that investing is not for you and you donât accept the fact that
many really do make money in the Forex, itâs your decision. However, if you
follow the rule
If someone else can do this, then I can, tooâ,
then that is also your choice.
Remember that youâll never be fooled, if you are armed with enough information about the financial markets. Donât be idle; - fill the gaps in your knowledge. Donât invest money you cannot afford to lose and donât argue with those who have failed. Just remember that in 90 percent of cases itâs the traders who are the reason for their own failure.
FXFINPRO CAPITAL Company sincerely asks its customers and readers not to rely on public opinion but to try to make their own analysis of any issue regarding investments. Always try to obtain the opinion of independent experts.
FXFINPRO Capital Company is a supporter of the healthy trading relations and professional trading. Contact us today and we will dispel the most deep-rooted myths about Forex and prove that trading in the financial markets can be both interesting and profitable.