Common Myths (and One Truth!) in Forex Trading
(eToro Blog) It really doesn’t matter how long you’ve been trading; forex myths which swirl within the financial stratosphere will ultimately prey on your psyche, but if you’re aware of the facts and fallacies you’ll have a better chance of avoiding unnecessary frustrations at best and unwelcome trading losses at worst.
Number 1 on the forex trading hit parade is that it’s the easiest path to get rich quick. Let’s bust that myth wide open, shall we? As the best traders will tell you, trading takes patience (lots and lots of it), consistency and a conservatively low draw down. There’s a saying among pilots: “There are old pilots and there are bold pilots but there are no old bold pilots;” that’s apropos for forex traders, too, only it doesn’t rhyme as well.
Forex trading is strictly the realm of the short term or day trader is myth number 2. You should refer to myth #1 for the response to this; forex trading takes patience and the best traders pay close attention to fundamentals and long term trends, and much less attention to the day to day blips that affect a currency pair.
Number 3 is the belief that you as a forex trader can do no wrong. Every forex trader, regardless of whether a newbie or a well-seasoned investor, will experience a loss at some time or another. The key is to knowing when to cut your losses, and adapting a strategy to changing conditions or circumstances. In the immortal words of country singer Kenny Rogers; “you’ve got to know when to hold up, know when to fold up, know when to walk away, and know when to run.”
“The more the better” strategy is myth number 4. More is better – up to a point – if you’re talking about diversification within your forex portfolio. The more the better strategy is not necessarily a winning strategy if you’re considering adding a lot more currency pairs to your mix. Let me give you an example; let’s say you’ve done well (profit-wise) by exclusively trading the EUR/USD pair and you’d like to branch out a bit so you mix in a USD/JPY trade as well, and you seem to have a handle on that, too. Then you think well, why not add in the EUR/JPY and the EUR/GBP pairs while you’re at it, and maybe a GBP/USD, too, just for the heck of it. Now you’ve got five different pairs going at a clip, and you’re trying to keep your eyes on all of them at once. Not so easy, is it?
“To make money you can simply copy other traders,” number 5, is no longer a myth but a reality! In the old days, you could follow another trader’s advice to the T and still not make a profit because you’d be too slow by just a few seconds and miss the entry point or exit point by only a few pips. The fact is that with OpenBook’s CopyTrade feature you can now copy any forex trader you desire and can make the same gains (and losses, let’s be honest as that’s always a possibility).
So how many of these myths have you been snagged by? Do you remember the days before OpenBook’s CopyTrade? Good riddance, right? Feel free to share your story with us here in the box below.
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