Forex Trading Fallacies: What You Should Know
11/13/2014 9:00 am EST
In this article, Sean Lee, at FXEmpire.com, shatters the most prevalent trading myths, misconceptions, and fallacies associated with the forex market and offers tips on how to avoid them in both the development and implementation of a disciplined forex trading strategy.
Whether you are a seasoned trader or a newbie, you cannot really be absolutely convinced of the fact that you are totally free of the innumerable myths or fallacies which the world of forex is brimming with. A trader’s fallacy is in fact, one of the potent ways in which a trader can go wrong. So what exactly are the misconceptions that you should be aware of, as a trader? Read on to find out.
What Are the Myths Surrounding Forex?
Forex Is Designed for Short-Term Trading
One of the major fallacies that has riddled the largest financial market (in terms of volumes of trade) is that it is actually meant for short-term traders. Now, the presence of high leverage does not necessarily mean that forex can be indiscriminately branded as a short-term trading proposition. Forex is very much about long-term tradable trends as well. The traders looking for long-term benefits are more concerned with the larger trends and not really bothered about everyday swivels in the market.
Forex Is the Simplest and Quickest Way to Riches
Budding traders, making a foray in to the forex market, considering this to be their passport to quick riches, might as well think again. This prevalent belief, ruling the market space has hastened the entry of many a traders willing to make a quick fortune. However, it should be remembered that forex is as much about patience as it is about making huge (not quick) wealth. All of it starts with the choice of right trading software. Do you really think you would be able to generate huge profits without investing time in monitoring the market in a bid to analyze it and then build on your strategies in accordance? You need to demonstrate due consistency if you are willing to make it big here. The more you learn about the complicated charts and other analytic tools, the more you are likely to psyche out. However, contrary to popular belief, success in forex is not about simplicity. The belief that simple tactics will yield better results than the complex ones is generally perpetrated by traders who are afraid of comprehending the complex layers of each of the trading strategies.
Identified Profit Targets Are Infallible
You might come across trading systems which help you to benefit from an identified profit target. Scalpers usually set large targets just because they have spent considerably more time on the trading charts than the long-term traders have done. The problem is—just because the scalpers are doing it—does not necessarily mean that it’s a good practice. The market is hardly bothered as to what your targets are. For instance, if the market wants an offer only up to 10%, it won’t really bother if you are setting the target at 20%.
There Is a Perfect Strategy for Success
The belief that you can chalk out an infallible strategy has its own dangers. It will either leave you cornered forever or else leave you languishing with an over-optimized and inflexible game plan.
By Sean Lee, blogger and web content editor at FXEmpire.com