Good day everybody.
Welcome to my new forex education series for traders who are new to forex trading.
At the end of this series, my aim is to help you embark on your journey of forex trading. To foster the right mentality and style.
I call this series, Learn Forex The Right Way Series.
Today with part 2, i am going to touch on the various myths and truth of forex trading. Firstly, i would like to set your expectation on the real truth about forex trading. A simple way to get rich fast is definitely not how forex works. Let us review a number of forex myths and truths.
Forex Trading Myths
- Making money in forex is easy
Contrary to this, surveys show that 95% of forex traders lose money.
- Forex is a way to get rich overnight
Consider this for a moment. What if forex trading is indeed a way to get rich overnight? No one will be having proper jobs anymore!
- A small deposit is good enough to make big money
If your deposit is small, you will need to risk an over sized position for your capital to produce big results. When proper money management is not followed, expect to face the horrors of a margin call soon.
- There is this “insert any absurd promise of a huge gain in a short period of time trader / system / expert adviser i can follow”
There is NO holy grail for forex trading except for proper money management. The forex market is an ever changing market. No one or system or expert adviser can ever predict with 100% accuracy
There you go. Consider this a wake up call if you are indeed starting forex trading along the lines above. I have suffered THREE margin calls before. These forex trading myths above were once my thoughts too. If you decide that making money in forex trading is easy based on the above, it is no better than a trip to the casino!
Alright. Away with these myths, what is the truth about forex trading then? Are we destined to lose our money? Can you make a living trading forex?
Forex Trading Truths
The truth is we can make money from forex trading provided we do so in the proper way.
- Making money from forex trading requires patience, discipline and hard work
Proper money management is a must and discipline is needed to adhere to it. Expect time committed to reading forex trading articles and global economic news, etc. Forex is a global market with many push and pull factors
- A gain of 10% in a week is phenomenal and unrealistic
Mutual funds run by full time professionals may give you that in a good year. Be realistic and understand that the forex trading reality is one of a slow and steady path.
- Not every trade is a winner
Expect to make wrong trading decisions and have the discipline not to let the losing trades run beyond your stop loss. Planning your trades well is important and this is where proper money management will save your forex account for another day. Avoid forex trading based on emotions.
- Not trading at times can be a wise position
Do not suffer from an obsessive trading disorder. The constant urge to trade will result in failure one day as you may start to risk excessively in a bid to be in the market. When the going is not right, stay on the sidelines. The market will always be there.
- Success in forex trading is a constant learning
You can never reach the top, the peak, the holy grail or whatever! The forex market changes constantly and our learning of that continues on constantly. Risk aversion may be causing the US dollar to rise in value in one moment and next a reversal may happen due to a positive economic development. Slow and steady profits is the key here.
If you find the truths above reasonable, logical and something you can practice strictly, i will say you are off to a good start understanding forex trading.
The Bottom Line For Forex Traders
Remember there is no guaranteed success in forex but with the real mentality and attitude, the chances of making a living trading forex will be better! Leverage on proper money management to allow yourself to gain experience, learn from mistakes and understand the undertones of the forex market. Evaluate all your forex trades and strive to improve on it for the next.