From working with many traders, we often hear about certain trading myths. In this article we look at the main ten myths and lend our advice.
1. Get Rich Quick
Forex (FX) is a major contender in the retail trading market due to ease that aspiring traders can get hold of the necessary software to trade it. Therefore, many companies have spent a vast amount of money on marketing FX as a get rich (with little effort) financial plan. However trading takes dedication and consistency, and is certainly not for those with a gambling-throw-it-all on a couple of trades and hope for the best mentality.
2. Copying Someone Else
There are plenty of online and classroom options where you can follow another trader and simply place the same trades they do. However even if this does work, then what do you do if the trader retires or leaves? You are left in a position where you have spent money to make money but don't actually leave knowing how to trade. Even if you spend two years trading a demo account for an hour in the morning before work you will get further than just copying someone else's trading.
3. The Holy Grail of Trading!
From working with so many traders over the years, we have seen traders who believe that they have found a way to beat the markets with a 100% winning strategy. This never works for a long amount of time and the traders who have stuck to a well-developed strategy will always come up trumps in the end. Many novice traders will spend a huge amount of money chasing the holy grail and in truth there isn't one. You will be able to create your own strategies from the markets with time and practise as well as developing them in accordance with an every changing market.
4. Invest Hugh Amounts to Learn How to Trade
There is absolutely no point in spending thousands of pounds learning to trade. Find a good course that gives you value for money or learn from books and then trade alongside others. Trading next to successful traders is priceless, and will increase your trading ability far more than an classroom course ever could.
5. Predicting the markets
You cannot predict the market. This is a mistake that many novices make when they begin their trading journey. Whatever happens you have to understand that you are going to have some losing trades. Therefore stick with your strategy and understand that you will have winning and losing trades. If you continuously move stop loses, change targets etc. you are not trading, you are gambling and this burn through your account incredibly quickly.
6. The More Pairs the Better
If you make money using one pair it does not mean that you should then replicate this strategy and use it across ten pairs. If you focus on trading a couple of currency pairs that you understand you will find your use of time more beneficial, especially if you have only been trading for a few years.
7. You Can Be Right Every Time
You can get a strategy that will be consistently right for a limited amount of time however as time progresses this strategy will not be able to adapt to the ever changing market and will lose money. If you just sit and wait for a 100% winning strategy you are never going to be a trader, as you will find yourself sitting on the side-line testing strategy after strategy on your demo account and never going live.
8. If you Lose it Must be the Brokers Fault
It is up to you to research into various brokers and make sure that they offer the best service available. Did you just sign up with the first broker that you you found, or did you do research into commissions and spreads? You need to speak to an experienced trader and ask them who they trade with and the reasons why. A mistake that many beginners make it to go with the most advertised broker, which usually means that you will be paying spreads of over 2 on major currency pairs, this should be 0 to 0.3. We have researched different brokers and have chosen LMAX as our main broker due to their low spreads and excellent client service, many of our members also use this broker. https://apply.lmax.com/uk/step1?affid=ftf
9. You Can Trade the News
Do not trade the news, so many novice traders fall into this trap. You may do it once, make money and then just burn burn burn your account. The large movements happen within a couple of seconds therefore there just isn't enough time to get into the trade and by the time you have plenty of other people will be doing exactly the same thing and the market movement will become unpredictable.
10. You Can Start With Nothing
You cannot trade FX full time with £100 account unless you are exceptional good and you can find investors. Even if you did find investors the physiological strain that trading large money after a small account could affect your trading. If you only have a small amount but need to make money to live on, you will start to increase the risk and gamble more. This may work if you are lucky for a small amount of time but inevitable it will lose you money.
Trading FX can be a fantastic money maker but you do need the time and the right people around you to make it work. You also need to understand that it is not a get rich quick scheme, so if you are in a position where you need to make money very quickly this is not the way for you. However if you are able to give trading the right amount of time and patience as well as investment you will find trading FX very rewarding.
Forex Trading Floors was set up with the intention of giving traders somewhere to come trade and learn from others without burning their trading accounts or enduring costly trading courses. If you would like to develop your trading skills by joining a private trading floor please email email@example.com to arrange a trading day.