There are many myths about forex trading that hold back the progress of many traders. In this article, I'm going to break down some of the myths and show you how these beliefs can prevent you from reaching your full potential in trading. If you find that you are close to something, then this is usually one of the main reasons holding you back. It may take you a while to figure this out.
Learning to trade Forex is easy
This is the biggest myth about Forex. It has 2 components.
Some people on the Internet perpetuate this myth, and it spreads easily. They have YouTube channels called “Forex trading made easy” and all that crap. Unfortunately, this happens everywhere. They will tell you that investing in real estate is easy or that making money on eBay is easy.
It actually takes a lot of practice and hard work. Successful forex trading is no different from truly achieving success in any other skill. There will be challenges and failures before you succeed.
On the other hand, Forex trading seems simple. At first glance, it seems that all you are doing is learning the system and following the rules. However, learning to trade is not easy, and you must understand this.
Brokers are interested in your losses to make more money
There are several shady brokers who may intentionally hit your stops. They are usually located somewhere on a tiny island with questionable regulation.
However, a well-regulated broker in a major financial center of the world will not deliberately hit your stops. Because of his reputation, he will not risk a few extra points.
Traders who typically complain about intentional stop triggering are new traders who set their stops too tight.
All you need is the right trading strategy
Even the most profitable trading system ever created will not work for you if it does not resonate with your personality.
If a trading teacher only sells a system and does not give any instructions on psychology, then understand that you are only getting a small piece of the puzzle. Without the right mindset, it will be difficult to trade this system.
A success-oriented mindset will help you overcome setbacks, cope with disappointment, and deliver quality work. Without this mindset, you will simply give up sooner or later.
Dealing brokers are trading against you
Again, in some parts of the world there may be shady brokers who do this. So do your research before sending your money to a broker.
Yes, dealing desk brokers will be your partner on some of your trades. Some new traders misinterpret this as if the brokers are trading against you.
While they do make money, if you lose, they are actually helping you by taking the other side of the trade. When the market moves quickly, dealing desk brokers can sometimes provide better order execution because they provide liquidity and bear the risk.
Since ECN or STP brokers route all client trades to the market, there may not be enough traders willing to take the other side of some trades. This means you may get a bad response or no response at all.
A dealing desk broker can provide more liquidity, which is better for the independent trader. Dealing and non-dealing brokers have their pros and cons. Find out what they are and which one is best for you.
The more confirmation the better
Have you ever seen a graph like this?
I hope this is not your schedule.
This is an example of a trader who is looking for too many confirmations.
- First, if a trader is looking for that many confirmations, he will probably not make any trades because all the indicators will never line up at the same time.
- Secondly, this chart is so cluttered that the trader cannot even see the price.
- Thirdly, there are no guarantees in trading.
The vast majority of successful traders have a very simple strategy and are very good at executing it.
Successful forex trading is difficult
Successful traders use simple trading strategies.
So stop trying to make your trading more complicated than it needs to be.
Don't beat yourself up if something doesn't work out for you. Be aware of your perceptions and look for ways to change them. The best way to find out what really works is to start testing trading strategies.
More knowledge is better
Some traders get stuck in learning mode forever and never make a trade. They are always looking for the next piece of information because they think they don't know enough yet.
In my experience, there are 3 main reasons for this:
- A trader views trading as a purely intellectual activity. They don't really want to risk money, and that's okay too.
- The trader has self-doubt. He thinks they are not good or smart enough to be a trader.
- A trader has a fear of failure. It is better to have good trading knowledge than to have poor real trading knowledge.
If you fall into category 2 or 3, open a demo account and just start making trades. This is the only way to start developing.
The guitar doesn't play by itself; you have to learn how to play it. Your trading account balance will not increase on its own either.
Trading robots – an easy way to make money
Commercial Forex robots (advisers) are completely useless. If you don't know how a robot works, how will you know when it stops working?
Most robots are over-optimized for a certain period of time. They work great in certain market conditions, but they fail when market conditions change.
If you have a chance to get a robot that actually has a solid trading strategy, you will probably turn it off at the first sign of a losing streak. Again, since you don't know how it works, you assume it has stopped working. Either way, robots are a recipe for disaster.
However, if you have a trading strategy in place and want to automate it, then a robot is a great way to use technology to help you make more money. Since you know what the robot does, you will also be able to customize it.
You don't have to pay for trading tools or training
Nowadays there are so many free resources about trading that many people think that everything should be free. Well, creating these products takes time and money, and their creators need to be paid somehow. You wouldn't go to work for free, right? Then don't expect others to work for free.
Thinking that people owe you something is also a poverty mindset. Of course, there are many great free tools out there, so use the ones that suit you. But also be prepared to pay for quality.
Psychology doesn't matter
Trading psychology is 90% of success in trading.
If you have the right mindset, you can overcome obstacles, find the right teachers, and put in the effort needed to succeed. Traders who do not have the right mindset will blame others, trading strategies and their broker. If you want to become a successful trader, take responsibility for your trading and work on your psychology.
Trading on lower time frames will lead to higher profits
In my experience, only a small number of traders can be day traders. As we discussed here, day trading or scalping can cause brain activity similar to drug use.
Traders may get a thrill from the excitement, but once the adrenaline wears off, they find that half their account has evaporated.
If you are not getting the number of trades you want in a week, simply add more markets or strategies. Switching to lower time frames requires more attention, and most people don't have time to sit in front of a screen for hours on end.
Successful trading depends on letting go of emotions
I don't know about you, but I'm not a robot. That's why I feel emotions. The key to trading success is working with your emotions rather than suppressing them.
We must learn to work with our emotions. Understand how you handle wins and losses. Identify situations in which impulsive transactions are most likely.
Even if you have a set of trading rules, they all mean nothing if you are not willing to follow them.
The same is true with automated trading programs. Some traders think that computer programs will take all the emotion out of trading. This is not entirely true, because you still have the ability to turn programs on and off. If you let your emotions get the better of you, then you will turn off the robot.
You must understand exactly why the market is moving
There are literally thousands of reasons why the market may move.
Retail traders do not have access to much of this information. Even people “inside” these markets may not know what actually makes the market move.
Therefore, it is useless to think that you can put all the pieces of the puzzle together to be 100% confident when you take a trade.
But luckily, you can still do a good job even if you only have a few key pieces of information. Accept small losses when you are wrong and make big profits when you are right.
Successful traders shouldn't have to pay for training
Let's say you want to start your own business. Perhaps you want to open a flower shop. Would you work on this business for free? Of course not.
Well, trade education is also a business. So why do some people expect traders to work for free? These trade educators create products and should be paid accordingly, just like any other business. The fact that these teachers are also successful traders does not matter.
You should only learn from successful traders
Obviously, learning from a successful trader will be very useful. However, you should also understand whether this trader is a good teacher. These are two completely different skills.
History is replete with examples of elite athletes failing as coaches. On the other hand, there are many legendary coaches who never played at the level at which they achieved their coaching successes.
Also keep in mind that your best mentor may not be a trader at all. For example, if you work with someone who can improve your thinking, that may be all you need to succeed in trading.
You should always trade with a stop loss
I used to believe that all trades should have a stop loss. Then I discovered hedging and realized that there are scenarios in which a stop loss is not needed. Of course, you should always control your risk, but you don't necessarily need a stop loss to do so.
I know several successful traders who do not use stop losses. They manage their trades with a mental stop and monitor their trades very closely. It works for them. Find what suits you.
Successful traders predict market movements
You will see a lot of market forecasts on various forex forums on the Internet.
“I think USDJPY will rise due to _______. ”
…or…
“The chart is forming a head and shoulders pattern, so I predict the market will go down.”
“My gut tells me the price will go up.”
Trading doesn't really work that way. Good traders react to favorable market conditions, but do not predict them. There is a slight difference here. They understand when they have an advantage and only trade when they have an advantage. When there is no advantage, they remain on the sidelines.
If they are wrong, many are also willing to quickly change their position. However, new traders try to predict market movements and usually stick to these predictions until their account balance reaches zero.
Trading more trading instruments means more profits
If you start trading 50 trading instruments, don't think that this is the only way to succeed, you may burn out.
Of course, if you are not getting enough trades per week or month, consider adding more trading tools. But don't add more just because you think it's the only way to succeed. I know a couple of traders who only trade 1 or 2 trading instruments and are very successful. More is not always better.
