Most currency traders are unaware of certain forex trading myths. These misconceptions can cost you a lot of money if you fall victim to them. In this article, we will discuss some of the common ones. These misconceptions may lead you to trade in unconventional ways or to use outdated techniques. And you might end up using borrowed money, like from loans obtained from deals with workers compensation lawyers following work accidents. You do not want to do that since it would lead to more debt.
The Market Is Easy To Read
You should never use forex trading thinking you will be successful. In addition, you should never back test any of your trading systems. While backtesting can be a good way to test your system, it does not apply to the real-world conditions. The world economy and geopolitical environment are very dynamic. For instance, the global economy was very different years ago. The Iraq war was on, Japan was in a deflationary cycle, and Alan Greenspan was in charge of the Fed. This made many invest in USD but they ended up losing money.
Lack Of Experience Does Not Matter
Most people think they can make a lot of money in Forex without any experience. While there is some truth to this, there are still plenty of myths floating around. The first one is that the market is always at a constant supply and demand level. In reality, the market is constantly changing, so you should never place an order that is too low or too high. For example, if a currency pair is trending down, you should sell it. A double top or bottom will not happen because traders are already ready to buy or sell. No system can guarantee a perfect performance, as there are many other factors involved.
Market Moves Can Be Predicted
A common forex trading myth is that you can predict market moves. However, this is a myth, but it is important to understand that the market is not predictable. You can’t control it. A thousand-pip target may seem achievable, but you might doze off when the market goes below it. You would have taken a partial profit and missed out on a big opportunity. Despite these misconceptions, it is crucial to learn more about the forex market and the best way to make money from it.
As much as possible, avoid the temptation to make predictions. The market is unpredictable. You have to accept that. This will prepare you for the challenges that lie ahead. For example, you might think that you have the market under control when placing a target of 1000 pips. Then, when the market is falling below your target, you will slumber. Instead of booking a partial profit, you will be out of money.
No Authority Exists
The last Forex trading myth to acknowledge is that there is no authority. You must accept the fact that the market is not predictable. For example, you may place a 1000 pips target, only to see the market crash under it. You would then be a sleepy skeptic and have to look for a better approach. This can lead to a huge loss. But if you accept this fact, you will eventually see that it’s possible to make money in the forex market.