There are so many misconceptions surrounding forex trading, as it is a remarkably complex undertaking. This is the reason why most novice traders often fail right at the beginning of their trading attempts as they enter the world of trading with some costly misconceptions. Trading with false information will lead you to miscalculate your competence, and you will certainly pay the price for failing to discern truth from myth. Don’t worry! Below, we’ve cleared up 10 of the most common forex trading myths to enlighten your journey to success.

1. Forex trading is a quick way to gain wealth

This is probably one of the most widespread Forex trading myths. Most newcomers to trading choose forex with the expectation that Forex trading will provide them with a faster way to accumulate wealth. Thus, we see many young and curious traders jump into trading without doing their homework. Most of them do not have a basic understanding of how Forex trading works. Trading is not their primary focus; they are more concerned with making some quick cash rather than learning and gaining experience first.

However, the first thing you need to do to succeed in Forex is to let go of the notion that trading Forex is some kind of get-rich-quick scheme. There is no such thing. There is a lot of hard work, discipline, learning, and patience required to succeed in this business, and success is never guaranteed. The best traders don’t make a few trades and then walk away; rather, they keep going trade after trade, even when market conditions are slow. Consistency is the key to trading, not a gambler’s mentality of throwing everything at a couple of trades at a time.

To manage your risks, trade profitably, and set yourself up for the long run, you need to learn forex trading from scratch. While forex trading is easy to learn, you’ll still have to practice and learn to embrace your mistakes in order to succeed.

2. Trading forex is only for short-term investors

The popularity of short-term forex trading strategies like day trading, and scalping has led to the misconception that the forex trading market only caters to short-term traders. The volatility of the market along with high leverage have also contributed to the popularity of short-term forex trading. Whereas the truth is, forex trading is suitable for both long-term and short-term investment goals.

While trading on very short time frames like M1 or M5 looks very attractive to many people due to the highly fluctuating price movements and the potential for rapid profits, long-term strategies have proven to be more successful due to compounding. Long-term forex trading also focuses on more fundamental aspects intended to make steady profits with time. In long-term trading, the time between entry and exit positions can range from a few weeks to a few months, even years. Traders who trade in higher time frames will also receive more profit pips with each trade, pay fewer spreads, and also experience less stress.

Here’s a detailed comparison of short-term vs long-term forex trading to help you decide.

3. The more you trade, the more profit you make

There is no doubt that quantity is the key to success in any business. This implies that the more work you perform, the more money you will earn. A greater number of productions equals a greater profit. Forex trading, however, does not work this way.

In Forex trading, placing more trades actually dilutes your chances of making a good profit. Having a limited number of trades naturally encourages you to choose the strongest and most accurate setups. However, when you try to overtrade, you will find yourself choosing setups that are also less accurate.

It is possible to make a great deal of money trading a few times a month for a professional trader. Instead of focusing on your trade volume, focus on your results. It is advisable to focus more on your trading plan and the quality of your analysis. It has been said that 50% of your success in Forex trading depends on developing profitable strategies. The other 50% relies on an effective risk management strategy. On that note, having a well-thought-out set of risk management rules is a must when you have a small forex account.

4. Trading news releases can be profitable

It is commonly believed that trading news releases can be profitable, given the volatility of the markets, which is one of the most prevalent forex trading myths. With hindsight, watching the currency move following a high-impact news announcement like the US Nonfarm Payrolls (NFP) Report can make people feel excited. Unfortunately, real-time trading of news events can be dangerous.

Although volatility can make us money, trying to trade an event whose outcome and market response cannot be predicted is risky. There will be a dramatic increase in spread and slippage when the USA releases Non-Farm Payroll and FOMC reports and other currencies release Consumer Price Index and Bank Rates. It is recommended that inexperienced traders stay on the sidelines or set up a CENT account to get used to the increased volatility. Putting hard-earned capital at risk is not a good idea.

Traders must understand that they do not have to trade the market just because it is heavily fluctuating. You see a lot of volatility every single day, but most of it is just a trap waiting for unprepared traders to fall into. When a trade goes in a trader’s favor, it is common for them to mistake luck for skill. Traders who are just getting started are often unknowingly setting themselves up for big losses in these situations. Occasionally, you may find a few winners purely by chance, but their chances of continuing success are almost nonexistent.

Read the major forex trading sessions and the best times to trade forex for a comprehensive understanding of this topic.

5. You need a lot of capital to get started with Forex trading

Several people who are ready for forex trading hesitate to take their chances because they believe that they need a large amount of capital to begin trading, which is actually among the forex trading myths. There is no need for a large investment when trading forex live, as the amounts vary from broker to broker.

You can start investing with as little as $1 and start your forex trading journey instantly with AximTrade. Based on your trading strategy, experience, and investment capital, you can choose from several account types such as a Standard account, Cent account and an ECN account.

However, you must understand that small investment capital would only imply smaller lot sizes, fewer trading opportunities, and eventually marginal profitability. Small gains can frustrate traders and make them give up. Starting with a $50 or a $100 investment can give you a greater advantage in Forex trading and can lead to increased earnings over time.

6. Forex trading is more like gambling

Many people have this misconception about forex trading because they don’t understand it. Having no idea what’s going on behind the scenes, they see trading as a 50/50 chance, either the markets will go up or they will go down. It is likely that they will place their money on a currency pair of them and pray that things will go well. Forex trading doesn’t work like that.

Despite the fact that traders share some similarities with gamblers because they can win or lose money depending on certain choices, forex trading is different from gambling. In gambling, you stake your money in the hope that you will win. You don’t know how that is going to work out and who will win. Gambling is based on unrealistic hopes and you have more chance of getting hit by an airplane. Comparatively, forex trading involves implementing fundamental and technical analysis, indicators, charts, and strategies to forecast market movements, which gamblers are not required to do so.

When it comes to forex trading, it’s all about probabilities. You must analyze everything about the markets and even the real world to be able to make informed decisions. As you look at more and more information, the probability meter moves up and down, eventually, it sits in one corner, which is what you will trade. With the right hedging or risk management strategy, you can still save your capital from loss.

7. You can’t trade if you have a full-time job

This is one of the many forex trading myths asserting that if you want to make a good profit at forex trading, you have to spend a lot of time looking at the charts. The truth is, the majority of forex traders start out by trading part-time while working a full-time job in order to supplement their income. In fact, there are no experts in the field of investment who would recommend you to take on full-time trading until you have proven yourself over a long period of time. The decision to pursue forex trading as a full-time career is like entering a battle — you have to be prepared and ready if you want to win.

For part-timers and beginners to forex, copy trading can be an excellent way to begin their trading journey. Copy trade enables forex traders to copy the strategies of successful professionals and helps them utilize their expertise to generate profits. Those who want to increase their capital but lack the time or experience to do so by themselves just need to open a forex account to reap the benefits of this trading method.

In spite of this, there are significant advantages to remaining part-time until you have gained the experience and confidence to switch full-time. A real job can have a significant psychological advantage in that it keeps you off the screens and from making impulsive decisions when trading. It also prepares you better to make methodical decisions by providing less information to cloud your thinking.

8. Leverage can help you become wealthy

There’s no doubt that, forex leverage allows investors to increase the rate of return on their investments by using borrowed funds. While forex leverage certainly can help you become rich, it will also expose you to greater risk if it is used incorrectly. Regardless of how attractive leverage may seem, you should always keep in mind that excessive leverage can wipe out your entire starting capital in a matter of seconds.

Beginner traders should only select the level of leverage they feel most comfortable with. A lower level of leverage, such as 1:10 or 1:50, may be more appropriate if you are conservative and don’t like taking risks. Choosing the right forex leverage level allows you to earn more money from your trades and helps you achieve financial stability.

It is also a wise idea to practice applying leverage on a risk-free demo account first. You can learn how to manage leverage effectively by using trailing stops, trading small positions, and limiting your risk for each trade by using trailing stops. You can find more information on how to choose the right forex leverage in this detailed article.

9. Following what others do is the best way to learn

It seems like there are always a lot of opinions floating around on how to trade, what to trade, and when to trade in every forex forum you can find. Yet, you are ultimately the one who is going to reap profits or losses when your money is on the line. It is important to filter and scrutinize all information before acting on it, even if it comes from professionals (or other experienced traders).

Some inexperienced Forex-newbies do over trust their mentor and blindly make their trading decisions hoping for a successful outcome. No matter how experienced a trader is that they’re following, there is always the chance that mistakes can be made — and a sudden decline in the markets can make everyone look foolish. As you trade, it is advisable to conduct your own research and follow risk management strategies.

Your mentor may have a great approach, but just because it worked for them doesn’t mean it will work for you. A trading approach that works best for your mentor doesn’t guarantee it will be the same for you. You have to be clear about your approach. Unless you know everything, you can’t blame others if you lose money by following their method; they won’t refund your money, so you should be knowledgeable about everything.

10. Earning a living in forex is only possible through trading

Despite the fact that trading currency in the online market is a well-established opportunity for investors to generate revenue, this market also offers several business models to generate profit without the need to trade. Sounds interesting, right？ Say, you run a blog site, a YouTube channel, or an Instagram account with a large fan base, and other traders turn to you for advice on how to improve their trading technique, a Forex IB role can be an excellent fit for you!

Many entrepreneurs have gained the massive benefits of establishing a partnership with forex brokers and generating profit without the need to learn how to trade or to trade by themselves. Many forex brokers offer affiliates excellent earning opportunities through Forex IB programs. One of the best things about these types of forex commissions is that they are not limited to one purchase or to a time period.

Unlike retail and e-commerce which offers a one-time commission per code, the forex commission is a lifetime and accumulated percentage based on the trading activities of the IB’s accounts. This means that establishing a forex business network is highly profitable in the long term. Read the 5 Benefits of becoming an Introducing Broker to learn how you can benefit from this partnership.

Eliminate your Forex Trading Myths with a Free Online Course

Remember that a successful forex trading endeavor cannot be achieved without sound Forex education. As a resource for learning how to excel at forex, AximTrade offers a multiscale comprehensive online Forex course conducted by professional traders that help anyone become familiar with the forex market by dispelling their forex trading myths.

This course is entirely free and gives a lifetime access to every aspect of the learning curriculum. Taking this course at your own pace will allow you to learn at your own pace, and upon completing the course, you will be equipped with all the knowledge you need to succeed in the global forex market.

Original Article: Forex Misconceptions: 10 Most Common Forex Trading Myths

Disclaimer: This post is from Aximdaily and it is considered a marketing publication and does not constitute investment advice or research. Its content represents the general views of our editors and does not consider individual readers personal circumstances, investment experience, or current financial situation.