There are numerous common misconceptions about forex that are peddled as facts, especially to new traders, by people who do not understand the global forex markets. In this article we debunk five of the most common forex misconceptions or myths so that new traders can trade with confidence.
Myth One: It Is Expensive To Trade Forex
This is a very common misconception, especially among new forex traders, who are made to believe that you need thousands of dollars to open a forex trading account. This misconception originated before the rise of the internet and online retail forex trading. In the past, forex markets were only accessible to affluent traders who could trade with large amounts starting at USD 1 million.
With most brokers, a trader can open a live account and start trading with as little as USD 50. With Exness, the minimum deposit is as low as USD 1, which makes it even easier for beginner traders to open accounts and start trading.
Myth Two: You need complicated strategies to make money
Many new and experienced traders are made to believe that they need to have complicated trading strategies in order to make money trading the global forex markets. However, this is not true. Many forex traders who use complicated trading systems do not make money at all.
Often the most successful forex trading strategies are the simple trend-following systems that are easy to understand and that align with the dominant trends in a given market. Most complicated trading systems have too many variables that are not easy to monitor, sometimes leading to losses.
Myth Three: To be a successful forex trader, you need to make accurate predictions
Although you can be a successful trader by making accurate predictions regarding the forex markets, this is not be the best method for long term success as a forex trader. The traders who achieve long term success in the market do so by conducting fundamental and technical analysis of the currency pairs that they trade.
Fundamental analysis involves the assessment of factors such as economic releases, fiscal and monetary policies, as well as news events that might affect the current and future direction of a currency pair.
Technical analysis is largely focused on analyzing the price movements of currency pairs in order to predict their future directions. New traders can learn effective fundamental and technical analysis skills from numerous sources online such as here on the Exness blog.
Myth Four: Trading the forex markets is far too risky
As an aspiring forex trader, many people will try to tell you that trading the forex market is far too risky. Although there is risk in every forex transaction that you make as a trader, you can limit your risk by using minimal leverage as well as by applying stop loss orders.
It is prudent to risk only a small portion of your available deposits on any one trade so that even if the trade goes against you, you will not lose your entire funds. Although Exness allows up to 1:Unlimited leverage, you should always use leverage carefully in order to best protect the funds in your trading account.
Finally, it’s important to note that there is risk in everything we do in life, including eating, driving and sleeping. However, this does not prevent us from going about these crucial tasks because, ultimately, the rewards can outweigh the risks.
Myth Five: The market is rigged
This is a common misconception, which states that many forex brokers are working against the best interests of their clients. However, for the majority of brokers this is not the case. Most forex traders clearly lay out how they make their compensation, often through the bid-ask spread, which is the difference between the buying price and selling price of a particular currency pair.
Furthermore, reputable forex brokers such as Exness are regulated so they cannot swindle their clients out of their hard-earned money.
Here we have covered some of the common misconceptions regarding the global forex markets, but this should only be used as a starting guide. Opening a Demo account with Exness is a good way to test our services as it gives you the opportunity to test your strategies before opening a live account.