6 Forex Myths and The Reality Behind Them
Forex trading has taken over the world by storm. Many consider the foreign exchange market to be the most liquid and valuable financial market worldwide, and for a good reason. According to BIS’s 2019 survey, the worth of the global forex market was approximately $2.4 quadrillion. Essentially, the forex market completely dwarfs all other financial markets, including stocks, bonds, and anything else you can name. Moreover, the survey also shows that daily foreign exchange trading reached new heights of $6.6 trillion. As a result, forex trading is quickly gaining ground with traders and investors worldwide.
Considering that the Forex market is already massive, most people would think it has hit its peak. However, that doesn’t seem to be the case. Various organizations believe the market will continue to grow exponentially. A study from the IMARC group forecasts the forex market to grow at a compound annual growth rate of 6 percent for the next five years.
Therefore, it’s safe to say that the forex market still has significant room to grow. In addition, what makes the market so impressive is that over 27 percent of forex traders are between 18 and 34. These numbers suggest that forex trading is particularly popular with younger traders and investors. Hence, the chances of forex markets slowing down seems to be untrue.
Since forex markets have shown such promise, many people are actively trying their hand at it. However, in some situations, people don’t understand what they’re getting themselves into, and as a result, they perpetuate myths about forex trading. We’ve crafted this blog post to set the record straight once and for all. Let’s delve right into it.
Currency Pair
Forex Myths and the Reality Behind Them
Here are some of the myths that people commonly perpetuate. We’ll be debunking them and portraying the real picture behind them. These myths are:
Forex Trading is Easy
One of the most common misconceptions to exist about forex trading is that it’s easy. However, this couldn’t be further from the truth. Forex trading is anything but easy. You’ll need to develop a comprehensive understanding of how markets work, the factors that influence them, and various other things before you can make profitable traders. Many people often jump into forex trading, thinking it’s a quick way to get rich. However, they set themselves up for failure.
Many people will often refer to the various trading software that exists. They’ll cite that using these programs can make forex trading a breeze for anyone. However, the reality’s that you still need to have an adequate understanding of the forex market to use these programs for profitable trading.
Forex Trading is a Short-term Strategy
Many people will often falsely claim that forex trading is only a short-term strategy. However, that’s not true. Various factors influence the forex market. Some of these factors include things like geopolitics, economic cycles, etc. All of these are macroeconomic factors that take time to change. As a result, claiming forex is a short-term strategy is a misnomer.
People will often cite how forex currency pairs change values quite often. The reality’s that while the daily news cycles can cause some volatility, long-term trends play a more significant role.
Traders Make Money by Predicting
Many people often think that the way to make money as a forex trader is by predicting events. However, predicting currency pair movements is easier said than done. You’ll have to analyze charts, assess historical market data, and recognize patterns before you can attempt to make a prediction. However, most predictions don’t always pay dividends. Savvy traders understand the difficulties associated with predicting forex movements. Hence, they’ll refrain from doing so. Instead, they’ll keep an eye out for the latest news developments. Since geopolitics can significantly impact the forex market, they’ll use these news events to make trades. Hence, they’re reacting instead of predicting.
Price Movements
You Need Significant Investment Capital to Trade in the Forex Market
For a long time, this myth was true. A few decades ago, only banks and other financial institutions had the resources to access and trade in the foreign exchange market. However, with the advent of electronic trading, things changed. Now, anyone can access the foreign exchange market, opening a world of possibilities for individual traders. Although statistics show that most of the forex trading is primarily performed by commercial entities, private individuals do account for 5.5 percent of all forex traders.
Typically, all you need in today’s day is a reliable internet connection. Most brokers will allow you to open a brokerage account with as little as $25.
Forex Trading is a Full-time Job
You’ll often hear people argue that forex trading is a full-time commitment and that you can’t do it without quitting your day job. However, that’s not necessarily true. The reality’s a little more complex. Although forex markets are open throughout the day, you don’t need to watch the market continuously for trading opportunities. It’s no secret that forex trading requires significant time investment from traders who wish to be successful. However, many traders exist who do forex trading as a side hustle. They allocate a small portion of their day to making trades. As a result, they can’t make as many trades as their full-time counterparts. However, they still manage to make a decent return on their investments.
In addition, you’ll find many automated software programs on the market today that can assist you in your trading. Although these programs only do half of the job, they can benefit people who don’t have the time to check forex markets round-the-clock.
Forex is Rigged
Some traders will often go on a spree of bad trades. Afterward, they’ll claim that the market is rigged against them. However, that’s not true. Although governments and central banks can control a country’s currency to some degree, the situation is more complex. Forex is too liquid and volatile for it to be rigged. The distinguishing factor between successful and unsuccessful traders is the former have developed strategies to maximize their chances of success. If you’re constantly making bad deals, the chances are that you’re the one who needs to change their approach.
Forex Trader
Get Started in Forex Trading with Crystal Ball Markets
If you’re looking to get started in forex trading, you’ll need a forex trading broker. Crystal Ball Markets is an online forex broker and one of the best foreign exchange trading platforms. In addition, we’ve got several resources to help beginner traders get started. These resources include guides about the most popular forex pairs to trade, most popular currency pairs to trade, and more.
Visit our website for more information, or register today to get started.