There are Forex myths floating around in here a few of them listed so that you can avoid having them trip you up on your way to becoming a successful Forex trader.
90% winning trades is realistic — there is no successful Forex trader on the planet who experiences 90% winning trades on a long-term basis. It would really be great if this were actually true and that all we had to do was to buy some commercially available Forex trading software place in our computer, open up a Forex brokerage account, and watch the money flow in. Any Forex robots, Forex expert advisors, or Forex trading software touting winning trade percentages in the 90% range simply will not work over the long haul. It is more likely that 90% of traders using these systems will lose money.
Forex has no transaction costs — while Forex transactions are touted as having no commissions they definitely have costs and cost that can add up that you should be aware of. The way it works is this, the broker receives the difference between the bid and ask price of a currency pair known as the “spread”. A typical spread in the EURUSD is three pips, which is the equivalent of $30 when using a standard sized Forex contract. Some brokers may choose a combination of these spread as well as commission as their compensation, but most brokers simply are compensated using the spread. So quite naturally the higher the spread, the higher your transaction costs will be.
Forex trading is a get rich quick scheme — with all of the outlandish claims and false promises and the Forex industry it is no wonder that many beginning traders see Forex is a get rich quick scheme. Trading in the global financial markets is not a get rich quick scheme. In order to succeed in Forex trading you will have to start thinking of trading more as a marathon rather than a sprint.
Diversification reduces risk — this is one of more popular Forex myths out there. Many believe that by trading a variety of Forex currency pairs that they can actually reduce their level of risk. This is not necessarily true, especially for those who have no clue of what they are doing. Randomly entering trades in a variety of currency pairs will not necessarily reduce your risk. If you do not understand how the pairs you’re trading are correlated you could actually be in danger of multiplying your risk rather than reducing your risk.
What we cover just a few of the many Forex trading myths out there. Avoid falling into the trap of believing the hype and thinking that you can just jump into Forex trading without being educated and prepared. If you would really like to be successful then plan to be successful and put your efforts into learning the ins and outs of profitable Forex trading.
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