There are a lot of misconceptions when it comes to forex trading. We’re going to dive a little deeper and go through some misconceptions and debunk them. Here are the top 6 misconceptions with forex.
1. THERE ARE MINIMAL LOSSES
When it comes to Forex trading, you need to be prepared that there could potentially be some bad weeks depending on how the market is moving, and any other factors that come into play. However, you need to look at the overall picture not just daily or weekly.
2. YOU CAN'T EARN MONEY WHILE TRADING
You can certainly earn money while trading. Keep in mind it is a long term investment. You also need to be dedicated and consistent to earn and formulate a profitable trade strategy.
3. TRADING IS GAMBLING
A lot of people do get this confused because you're putting your money into something without knowing the outcome, which is false. Trading you're taking calculated risks, knowing that there could possibly be a loss. You're also going into trading with knowledge, historical and statistical analysis. While gambling, you're going based off of normally, a random outcome. You're not going in with analytical backing. Plus, anyone can gamble- it doesn't take knowledge to do so.
4. FOREX IS "GET RICH QUICK"
This is most definitely not a get rich quick scheme. Forex trading is a long term investment. It takes dedication, hard work, motivation and learning how to deal with losses and gains equally, having no emotion would make it easier because trading is a roller coaster until you get the hang of it. With that being said, you can build massive foundational wealth for yourself.
5. YOU NEED TO INVEST A LOT TO START
You can start with as little as $100 on your trade account since you can set your own target profits and mitigate losses with stop loss. It would be better to have at least a few hundred dollars because the smallest lot size you can do is 0.01 which on some pairs like JPY pairs risk is a bit larger with even a 0.01 size trade.
6. WATCHING THE MARKET FOR 24 HOURS
It's not necessary to watch the market for 24 hours. Being able to set TP (Take Profit) and SL (Stop Loss) means you can walk away from your trades with confidence after your analysis and trade decisions. The only time you need to watch the market is when you're making your trade decisions or doing some quick scalp trading.
Considering the above points, hopefully this gives you a better understanding of how forex and day trading really works.
WRITTEN BY: Leslie Lazaro