Hello dear fellow traders! In this article, we will look at the most basic myths of trading in the forex market and the industry in general. The author of the article is a trader with 7 year experience in trading in financial markets, as well as a former employee of a brokerage company, so I know what I’m talking about.
Myth 1- Forex is a scam ?!
Most people, especially in the post-Soviet space, are afraid of the word forex, considering it to be something from a series of financial pyramids or fraud.
As we know, there is no smoke without fire, so I will tell you where the legs of this opinion grow from. The thing is that the first brokerage firms were opened when in the post-Soviet countries there was no normal regulation of these markets, which, unfortunately, has remained in most countries to this day, and in this regard, companies were opened that carried out activities under the guise of forex brokers – the main purpose of which was to get your money, give you some money, and then when you replenish your account with a larger amount, drain you clean.
Partly about such situations I described in my book “Do it! The 5 Commandments of Trading”, who is interested in reading there the story of how such offices are thrown. In connection with such situations, people who have suffered, with full confidence assure that Forex is a scam, and their relatives and friends also believe, based on the opinion of their friend. But I want to tell you that such pseudo brokers have nothing to do with the market at all.
Therefore, you, as a trader, need to choose a large broker that has licenses and authority, and thus you will leave the “black brokers”. To understand the mechanics of such brokers, I recommend watching the movie Boiler Room.
Myth 2 - The broker is trying to drain me by changing quotes and manipulating the market.
A very common thesis among traders, many based on this build systems that hide their stop losses and mask their deals.
In reality, this can only be found in boiler room brokers, in really black brokers with an aggressive policy of taking away clients in the literal sense of the word. The employees of such brokers are often arrogant and far from professional people, so if a broker’s employee tries to put pressure on you in a conversation, then this is clearly a broker with a bad reputation.
How are things with large brokers, are they trying to manipulate deals, not counting the possible nuances of widening the spread and slippage, in most cases no one will do this. And here is one simple reason about 95-97% of all traders lose on the market themselves, due to violation of the rules of risk management.
Working in a brokerage company, in front of me, I could see the statistics of hundreds of thousands of accounts, and everyone who lost money lost it not because of broker manipulations, bad trading system – but because of:
- unconscious risk calculation
- conscious greed
- desires to recoup losses and earn
Myth 3 - Risks cannot be controlled in the forex market
I will say right away, except for the moment of force majeure and the bankruptcy of the broker. That risks can and should be controlled.
And here are some ways to do it:
– install the advisor Risk manager
– have a risk manager on the broker’s side
Both the first and second options will give you awareness of the specific figure of the maximum loss of funds and the risks that you bear.
If you trade with robots, then additionally use the Risk Manager advisor to control the total maximum risk on the account.
Myth 4 - Stock trading is safer than currency trading
It is often believed that stocks are more reliable and safer than currencies, this is a myth. think about this fact, the state is much less likely to default than companies go bankrupt. Having looked at the charts of currency pairs, you will see that even in strong crises, the exchange rate changes within a partial percentage, while the company’s shares can fall to zero in the event of bankruptcy.
Forex currency trading can be more dangerous only because of the large leverage, and not understanding the pros and cons of leverage, but this has nothing to do with the reliability of the country as a guarantor for a particular currency.
Myth 5 - You can't make money in the forex market
This opinion is shared by people who have lost money in the market. Yes, the market is clearly not an easy way to money, and here you definitely shouldn’t rely on freebies and an easy way to generate income. My answer is exactly where you can’t make money consistently and you shouldn’t waste time for this, so this is trading binary options, here you will definitely not be given
a) to earn stable
b) the knowledge and strategies obtained from trading binary options will be practically useless in trading through adequate terminals and with time periods of ordinary assets.
In the forex market, as well as in other markets, there are 3 laws that, once mastered, you can constantly earn:
- Strict control and settlement of money management for both transactions and account control
- Consistency and consistency of actions (trading with robots will help you with this)
- Controlling psychology and greed (stress on psychology will also help reduce trading with robots)