The forex market is considered one of the largest marketplaces in the world. With approximately $5 trillion being traded daily, the forex market becomes the largest global market in terms of volume of trading. With these numbers, there’s no wonder more, and more people are interested in finding out the recipe for success that has made so many forex traders rich.
Well, things are not as easy as they may seem, as the forex market is not exactly a get-rich-easy strategy. Like any other type of trade, it is a complex process that requires the trader to have a deep understanding of the market so that they can spot opportunities and take advantage of them.
To do that, beginner traders need to gather and analyze as much information about the market as they can. Fortunately, the internet is full of resources on this topic, and there are plenty of websites that provide guides about becoming a forex trader. Still, even with all of this information available, the forex market still has its fair share of myths and misconceptions.
Today, we will take a look at some of the most prevailing myths that every beginner forex trader needs to know about, in order to steer clear of misunderstood information and really take advantage of what the market has to offer.
Read a book or two, and you are ready to be a trader
This is among the most common misconceptions about the forex market. Many beginner traders think it’s enough to read a few books on how to be a forex trader, open an account with a forex broker, and they have all the knowledge they need to become billionaires. Unfortunately, things are not as easy. If they were, anyone would have been a forex trader by now.
If you want to become a successful trader, you need to do much more than reading a few tips and downloading a few e-books. Trading on the forex market requires a lot of hard work, trial and error, and most importantly, experience. And there is only one method to gain experience: by constantly trading and learning new things.
All forex brokers are the same
Another myth that prevails is the idea that all forex brokers are the same, and you can just pick the first one that comes to your attention. Things could not be farther from the truth, as the forex market is very complex, and there are a lot of levels in this industry.
Dealing desk brokers, for example, are market makers. This means they don’t allow traders to trade directly with liquidity providers. ECN brokers, on the other hand, allow traders to access the market more in-depth and interact with banks, retail traders, and sometimes other brokers.
An experienced trader knows that not even two brokers on the same ECN brokers list are the same, not to mention two brokers that have different market approaches. This means you need to do thorough research before choosing a broker that is right for you.
Forex trading is a way to get rich quick
A lot of inexperienced traders venture into the forex market, believing it is a sure method to get rich overnight. Even though this is the largest market in the world, it does not mean you don’t need to put in effort in order to prosper.
Trading, regardless of the market, is a very complex process, and you need to put in a fair amount of effort if order to master it. Make peace with the fact that you will probably fail a lot until you get a hold of how the market moves and behaves. Most experienced traders will tell you learning to trade forex requires a lot of trial and error, so be ready to learn from your mistakes.
The forex market is rigged, and brokers are corrupt
While it is true there are a lot of corrupt brokers out there, it does not mean the market is biased, and the winners are already chosen. There are plenty of unregulated brokers that operate in dubious environments, but you don’t need to associate yourself with them.
When you choose a forex broker, make sure they are regulated by at least one of the main regulatory bodies on the forex market. If you are not able to find any information about this on the broker’s website, you may want to keep searching for a different option.
You can only make money if you know how to make market predictions
Everyone knows that geopolitics and news have a significant impact on the forex market. This leads many to believe that only traders who can predict these actions are the ones making money. The situation, however, is a bit different.
While it is true that some people are able to make predictions that win them big money, the most successful traders are the ones who quickly respond to these global events rather than the ones who predict them.
By analyzing the charts and spotting patterns, experienced traders are able to determine some of the actions that are bound to happen again, and this is how predictions are made. Still, there is no guarantee that these predictions are accurate. This is why the quickness of reaction matters more than the ability to make predictions.
You need a lot of money to start trading in the forex market
Decades ago, only large banks and financial institutions were able to access the forex market. However, thanks to technology, the market is now available for anyone who wants to give it a chance. Through forex brokers, even someone that has no past experience in the trading world can try their luck on the forex market without needing to invest tens of thousands of dollars.
While it is true that more money means bigger profits, you need as little as $25 to start a forex trading account. Yes, you’ll probably only be able to make small profits, but it is a good method to learn and improve your technique until you feel confident enough to put more money to use. Some brokers even recommend you to use a demo account when you first start trading so that you can get used to the charts, graphics, strategies, and so on.