It’s true that you can make money in the Forex market. But on your path to financial success, you will definitely come across various myths about trading. And the sooner you dispel them, the better.
Now, let’s consider the five most common misconceptions:
Myth #1. You Can Make Good Money Starting With Just $100 in Your Account
When you start trading and deposit only $100 into your account, remember this:
Full-fledged trading starts from $1,000.
When you have less than a thousand dollars in your account, you inadvertently fall into a "risk group". Here's what we mean:
- You need to open more trades. You need to earn a lot, so you think that if you make 5-10 trades a day or an hour, your problems will go away. It may not be a very optimistic thing to tell you, but in 90% of cases, such an approach will lead to failure. "The more the better" strategy simply doesn’t apply here.
- Having only $100 in your account, you risk a lot. 5% is your limit per trade. But when your entire deposit is only one hundred dollars, you, unwittingly, break the simple money management rule, and your trading suffers from it.
Myth #2. You Don't Have to Change Anything
For some reason, people believe that they can change Forex trading. It's rather naive, don’t you agree? After all, it often turns out the other way around - Forex changes them, not visa versa.
It's nice to dream how you deposit money to your account, place a buy order and the price starts to rise. You wait for about 5 hours or so, and close your trade, making a good profit. But this is not always the case. Are you ready for the trade to close at the other end, at the stop loss? Are you ready that the price could go sideways for 2 weeks and your money will freeze?
Some of you may not be ready. But you should know one thing: successful traders don't get all stressed out in such situations. They simply:
- Risk 1-3% of their deposit in one deal, very rarely - 5%.
- Never move their stop-loss and take-profit after opening a trade.
- Open no more than 2-3 trades a day.
When you develop just a little self-discipline, things will go uphill. Don't put it off until tomorrow - start now. Take a pen and a sticky note. Write these affirmations:
- I risk no more than (…) in a trade.
- I can move my limit orders only in cases when...
- I can open up to (...) trades per day, no more.
Place this sticky note on your laptop, it’ll be your constant reminder. Just follow these rules regularly and you will be able to take your trading to a completely different level. You don’t risk anything, try it and see for yourself.
Myth #3. Technical Analysis is Better Than The Fundamental One
Technical analysis - analyzing the chart with your own eyes. You draw triangles, channels, study the structure of candles on the chart:
Many traders believe that technical analysis is better than fundamental analysis because the price takes into account everything.
Technical analysts believe that price action is all you need, and that the current picture on the chart is enough to predict the direction of the price in the future.
And yet, fundamental analysis perfectly complements the technical one. And not as difficult as it may seem.
Fundamental analysis is not a science: everyone uses it as they see fit and depending on their knowledge. But the basics of learning fundamental analysis is always the same: read analytics, learn the terminology and apply your knowledge in practice.
Speaking of the types of analysis. Traders distinguish one more type, and it’s also surrounded by myths.
Myth #4. You Can Make Money Trading Indicators Alone
Browsing trading forums, you can come across a popular myth:
"There is nothing simpler than indicators. Learn how to use them in just one week, and you'll be making $100 a day."
Sounds great. But is it realistic? Without trading experience, there’s no way that you’ll be able to study the indicators in one week and learn how to use them. A "week" is just not enough time for that.
But in fairness, indicator analysis is a useful thing. Indicators are a part of technical analysis. There is nothing wrong with using them in your trading:
In the chart above, we can see 3 indicators. One of them is RSI, Relative Strength Index. It shows price spikes.
Once the indicator rises above the 80 mark, the price reverses. If it falls below the bottom 20 mark - the price is likely to start growing. Likely, but not necessarily. You cannot blindly trade based on the indicator signals. Only beginners make this mistake.
Myth #5. Forex Trading is a Reliable Income Source
Well, this is the last myth for today. Do not think that you’ll be making money from Forex every day. Only the most patient traders earn regularly. Note: regularly, but not always. Discipline is the key.
- Choose the strongest candlestick patterns.
- Use proven indicators. Do not trust self-made indicators, advisors, "ready-made" trading systems, developed by some unknown trader you can’t trust.
- Keep a trader’s journal and record every trade. It will allow you to track your trading history to see what went wrong.
Summing Up And Debunking 5 Myths About "Easy" Trading
Today we have busted 5 myths about "easy" trading. Let’s see what we have:
- Serious trading starts from $ 1,000.
- Desire to learn and hack away at what doesn't work for you.
- Combine technical and fundamental analysis. Learn their strengths and weaknesses.
- Trading indicators only isn't a sure way to make money fast. Analyze the indicators’ readings together with other market information.
- We do not expect to earn money in the market every day. Be ready, that there will be drawdowns.
Analyze your trading approach based on these five tips and adjust your strategy if needed. We wish you the best of luck with your trading!
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