Forex or foreign currency exchange is a currency trading center where a trader buys a currency in exchange of a different currency. Forex is a highly lucrative market that has very high liquidity capability and functions around a globally centralized trading system, operating 24 hours a day and 7 days a week. Moreover, forex trading can be done with a very low capital investment.
As a result of its low risk and high profit earning capacity, forex has grown up to become one of the most preferred choices of hedge tool for every category of investors. However, like all other investment options, forex too has its own sets of myths that irritates and confuses both experienced and green-horn investors.
Guest Post By Stewart Smith from Oak View Law Group
For that reason, people who want to take part in forex trade should learn about the most common mistaken beliefs found in this market.
Common forex myths and their truths
Here are some of the myths surrounding the forex market and the truth behind them:
Myth # 1: Forex market can be manipulated.
Truth: It is basically the laments of loss making forex traders who spread such a rumor to relieve themselves of the heartburn as a result of the loss incurred by them. They cite a manipulated market or an unscrupulous forex broker as the reason behind their loss. Though the reasons are enough to justify such a claim, yet people should keep this in their mind that forex market is immune to any sort of rip-off. It should also be noted that forex market is the biggest financial market across the globe. It involves millions of trades and inputs every single day. Therefore, if a trader is casual and unprofessional in his investment strategy, then it is quite obvious for him to suffer a loss.
Myth # 2: Forex trading brings fast money.
Truth: It is the handiwork of the media all across the board. As a result of aggressive marketing strategy, erstwhile exclusive investment tool has now turned out to be everyone’s cup of tea. Unfortunately, it’s not like that at all. Due to heavy publicity of forex, it has being perceived as a quick fix to earn huge amount of dollars within a short period of time. In true sense of the trade, one needs to be tolerant with his investments and have full dedication towards one’s goal. Real traders usually keep their number of forex transactions steady. Therefore, perseverance is the key to be successful in any trade, especially forex.
Myth # 3: There are no chances of committing blunders.
Truth: In reality, humans are fallible and so, they are bound to commit mistakes that will result in a loss. Some people try to come up with a new investment strategy altogether with the hopes that everything will be fine. However, such people either implement an impractical investment plan or permanently stay out of action. People should realize that investing into any asset class can be risky and there is every possibility of incurring a loss. Therefore, a practical approach with a little modification in the investment plan that will is in tandem with the current market condition is sure to give out great optimistic results.
Myth # 4: Following others in the trade is a smart strategy.
Truth: There is no dearth of how-to guides in print and online media. However, it is the money of the trader that is at stake. Traders should analyze every investment tips and advice before following any one of them. This is because they are themselves responsible for any amount of profit or loss and not anyone else. Moreover, traders should try to develop a strategy of their own rather than following the footsteps of others.
Finally, people who want to trade in the forex market should acquaint themselves of the dynamics of these kinds of investments. This can be achieved by burning the midnight oil to conduct a thorough market research and learning the fundamentals of the forex trade.
Further reading: Greed in Forex TradingGet the 5 most predictable currency pairs