About 5 years ago, right before I decided to get into forex trading, I was like many who were on the outside looking in. After all, by all accounts, if you were to believe everything that you read, you would think that trading forex could be as easy as learning a few indicators and plugging in a "proven forex system" and then laughing all the way to the bank. However, forex trading for beginners is much more difficult...in fact, even after you bust your "forex cherry", you are still in for a bumpy ride. Below are some common myths about Forex Trading and what beginners want to believe....
- There is a such thing as forex automated software that works- I see account after account talk about a forex system that claims that you can plug in a couple variables and profit month after month without a hitch. The problem is that there is NO AUTOMATED FOREX SYSTEM that exists that is profitable month after month. Think about it for a second...if you could develop such software, would you sell it? The problem with automated forex systems and their claims is that most forex traders like to think of trading like it is a "us" vs. "them". It isn't. When you trade forex, you are competing against all the other traders out there...which means the market is getting moved by emotions as well as technical data. I am not sure you can write a variable for the human trader's emotions and this is why an automated system would not work.
- There is a such thing as a "Proven Forex System"- Books are great for learning stuff. And there are many books that claim that their system will work without fail. The problem is that most of these proven systems are based on the trader's knowledge and since the trader writing the book most likely knows Forex Fundamentals, then he can fine tune his system on the fly...which is something that a beginner in forex can't do. I would like to add that systems do work sometimes, but you most likely will not hear about them. After all, why would a trader want you to know his secrets if he was profitable month after month? Books are meant to be sold, folks. Learn from them..test the systems out there and then apply what works for you.
- Leverage is Great..You can double your earnings in a month- Sure, this is true. But understand that the same high leverage position can just as easily wipe out your account.Leverage is something that most new forex traders don't quite get. All they see are dollar signs and the potential upside to trading with leverage...they don't see the other side, which typically is the side that most beginning traders end..that being the losing end...
- Trading Forex is easy- Trading Forex is not easy. It never has been and it most likely never will be. Don't believe me? Try talking to some of the newer guys out there..you know, the ones not selling the systems and books on how to make money trading forex. Most of the guys who are making money trading have spent years tweaking and testing their trades AND (drum roll please)........they understand the basic fundamentals of finance and trading in general; Things like how to find trends, support and resistance, and the dow theory. Too many newbies think that all you need to do is slap up a couple forex indicators on their platform and get a feel for the market...that, my friends, is gambling.
- Trading Forex is not Gambling- Alright, this is for all of you puritans out there that think that just because the banks have decreed currency trading as NOT gambling, that therefore it isn't. As a sports gambler, I am going to tell you the similarities are astounding, from how human emotion plays a part in the trades and volumes, to the "spread", a term that gives the brokerage two pips on either side of the trade. And if it smells like a rose, then it most likely is a rose. The key is understand your risk to reward ratio when making forex trades
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