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10 Myths About Forex Trading

10 Myths About Forex Trading

With an average turnover in excess of USD 5.3 trillion per day (according to the preliminary global results from the 2013 Triennial Central Bank Survey of Foreign Exchange and OTC Derivatives Markets Activity), forex (FX) is the largest market in the world in terms of volume of trading.

Like any other trade, forex trading isn’t without its fair share of myths. These myths can potentially affect any trader, seasoned or novice; so knowing and steering clear of these myths can save them unnecessary frustrations.

Below, we look into some of the most common myths about forex trading, which will be helpful for those who are thinking about trying their hand at currency trading.

1. Forex trading is easy

This is the most common of the myths about forex trading. “Read a book or two, set up a brokerage account and you are ready to make daily profits in the forex market.” Well, if you are thinking about jumping into trading forex, it takes a lot more than just reading a book or two.

Understand that trading is anything but easy. If you are dreaming about a quick buck trading the forex market, you’re in for a rude awakening! Some might suggest, “Download and set up an Expert Advisor Software and you’re sure to make big money trading FX.”

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Installing a piece of software may be easy, but being able to use the program effectively to for maximum profit requires a certain level of understanding of the market. The successful traders in forex not only put a lot of effort into what they do, they also have acquired years of experience to be able to place winning trades.

2. You need a degree in economics to trade forex

It is true that foreign exchange requires an understanding of world economics to a certain extent and that having a general idea of economic concepts is helpful in trading forex.  Nevertheless, it is not necessary to have an advanced degree in economics and understand every economic principle to be trading currencies.

Many forex traders come from diverse academic backgrounds. To be a successful trader, what you need is a good head for numbers, an intuition to help you guesstimate where the market is heading and the ability to react quickly to market-moving events.

3. You need to predict what is going to happen in order to make money in forex

Since geopolitics has a big influence on the forex market, the traders who make money are the ones who are quick to react to the things happening around the world, rather than the ones making predictions.

Trading predictions can sometimes be made. This may be possible by analyzing the charts and recognizing certain patterns that have occurred in the past and assuming they might occur again. But for the most part, it is rather the quickness of reaction that makes a trader money instead of novice predictions which may or may not come true. A good trader is always alert, reads and interprets the news and is always willing to learn and evolve.

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4. You need a large sum of money to trade in the forex market

There was once a time when only larger international banks and financial institutions could access and trade in the foreign exchange market. Thanks to the advent of electronic trading, those days have come and gone. Instead of launching a full blown and costly brokerage firm or bank, a small organization can simply launch a forex white label and be able to run a forex trading business very economically.

Furthermore, now that the forex market has become accessible to small traders through forex brokerage accounts, anyone with a reliable internet connection and a relatively small amount of money can trade currencies online. Nowadays, a brokerage account can be opened with as little as $25.

Of course, trading with $25 will probably not bring in as much profits as trading with $25,000. Nevertheless, a novice trader can hone his/her trading skills with smaller amounts first.

 5. You need to watch the market 24 hours a day to be successful

The forex market is open 24 hours a day and requires a lot of commitment from traders who want to succeed. But that doesn’t necessarily mean that you need to watch the market 24 hours a day to make money.

Some traders even have regular jobs. They manage to allocate a little time from their daily schedules to trading, which allows them to execute some trades at the end of the day – and still make a good income doing so. You don’t really need to sit in front of a computer staring at charts all day long.

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Besides, there are automated software packages available in the market that do a lot of the work for you.

6. Being unconventional improves your chances of success

Being conventional or unconventional does not have much to do with a person’s chances of success trading forex as much as one’s understanding of the FX market, its drivers and the factors that influence foreign exchange rates.

Rather than trying to be unconventional, good traders learn and adapt to the changes in the market, which improves their chances of success.

7. The higher the leverage, the better

Trading forex on margin carries a high level of risk. A good trader knows that the higher the leverage, the higher the level of risk because the multiplicative effect of the trades is higher. Trading with relatively smaller amounts of leverage reduces the possibility of losing all your funds, while trading with high leverage could lead to large losses that even exceed your invested capital.

It is true that you can get lucky and have higher leverage work in your favor, but the reality is that you have an equal chance that it can work against you. Why take that chance?

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8. You can get rich quickly in forex

In Forex, there are quite a few short term speculators who jump into the market hoping to get rich quickly with very little effort. Unfortunately, quick prosperity is rare even in the world’s richest market.

Trading takes a fair amount of effort to master, as well as significant patience and consistency. The impulsive gambler mentality seldom works in the realms of foreign exchange.

9. The more complex the strategy, the better

Complex is not always better. Although complicated trading strategies may sometimes bring you big returns quickly, it rarely ever happens. In fact, complex strategies in trading often prove  much more difficult to execute and earn a profit with.

Good traders often stick to simple strategies; strategies that make them money. In forex, even the best trader wins only a few more times than he loses, making a profit from the difference. Consequently, tweaking strategies to make them more complex may be detrimental and only increase the overall risk.

10. The market is rigged

When too many bad trades are made, some traders often complain that the market is rigged or that the brokers are corrupt. While it is true that a country’s currency can be controlled by governments and central banks to a certain extent, forex, as a market, is not a scam.

The truth is that forex is too liquid and volatile to be rigged. Forex rates change often and disciplined traders are there to take advantage of the fluctuations using winning strategies. If you are making too many losing trades, think about the most likely culprit: that you need to spend more time learning to trade rather than the market is rigged.

Featured photo credit: Pixabay via pixabay.com

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Nabin Paudyal

Co-Founder, Siplikan Media Group

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Last Updated on January 2, 2019

How Personal Finance Software Helps You Get More Out of Your Money

How Personal Finance Software Helps You Get More Out of Your Money

Do you know what mental health experts point to as the biggest cause of stress in the United States today? If you said “money,” then ding, ding, we have a winner!

Three out of four adults today report feeling stressed out about money at least part of the time. People are either worried about not having enough money or whether they’re putting the money they do have to use in the best possible way.

Your money is either in charge of you or you’re in charge of it, there’s no middle ground. Using some type of personal finance software can help alleviate some of that money stress and better allow you to manage your money effectively. Without it, you may just be setting yourself up for constant financial worry. Life is already tough enough and there’s no need to make it more difficult by simply hoping your money issues will all work out in your favor. Hint: they won’t.

This guide will help you to understand how personal finance software can better assist with both accomplishing long term financial goals and managing day-to-day aspects of life.

Whether it’s tracking the savings plan for your child’s college fund or making sure you won’t be in the red with the month’s grocery budget, personal finance software keeps all this information in one convenient place.

What Exactly is Personal Finance Software?

Think of it like the dashboard in your car. You have a speedometer to tell you how fast you’re going, an odometer to tell you how far you’ve traveled, and then other gauges to tell you things like how much gas is in the tank and your engine temperature. Personal finance software is essentially the same thing for your money.

When you install this software on your computer, tablet, or smartphone, it helps to track your money — how much is going in, how much is going out, and its growth. Most personal finance software programs will display your budget, spending, investments, bills, savings accounts, and even retirement plans, levels of debt, and credit score.

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How It Leads to Financial Improvement

It shouldn’t come as a surprise, but people who regularly monitor their finances end up wealthier than those who don’t. When you were a kid, keeping track of all of your money in a porcelain piggy bank was pretty easy. As we get older, though, our money becomes spread out across things like car payments, mortgages, retirement funds, taxes, and other investments and debts. All of these things make keeping track of our money a lot more complicated.

Some types of personal finance software can help make things a little less complicated, setting you up to meet financial goals and taking away some of the stress associated with money.

Even if you already have a Certified Financial Planner (CFP) some type of personal finance software can be of great benefit. Whereas CFPs focus on the big picture of your money, they don’t handle the day-to-day aspects that determine your overall financial health.

It’s also not nearly as complicated as you might think and can take out a lot of the tedium that comes with doing everything on an Excel spreadsheet or with a pad and pencil.

Types of Personal Finance Software

When it comes to personal finance software, it generally fits into two categories: tax preparation and money management.

Tax preparation software such as Turbo Tax and H&R Block’s software can help with everything from filing income taxes to IRS rules and regulations and even estate plans. Plus, there’s the benefit of filing online and getting your refund check a lot faster than if you were to mail off your forms after waiting in line at the post office.

For the purpose of this article, however, will be focusing more on the personal finance software that aids with money management.

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Money management personal finance software will help you to see the health of your cash flow, pay down debt, forecast for expenses and savings, track investments, pay bills, and do a host of other things that 30 years ago would have practically required a team of accountants.

When to Use Personal Finance Software

So far we’ve gone over what exactly personal finance software is and how it can be a benefit to your money. The next logical step in this whole equation is determining when it should be used and how is the best way to go about getting started using it.

Below are four of the most common and practical ways to use personal finance software. If all or any of these apply to you and your money, then downloading some type of personal finance software is going to be a smart move.

1. You Have Multiple Accounts

There’s a good chance that when it comes to your money, it’s in more than one place. Sure, you probably have a checking account, but you may also have a savings account, money market account, and retirement accounts such as an IRA or 401k.

If you’re like the average American, you probably have two to three credit cards as well. Fifty percent of Americans also don’t have loyalty to just one bank and spread their money across multiple banks.

Rather than spending hours typing in every detail of every account you have into a spreadsheet, many programs allow you to easily import your account information. This will help to eliminate any mistakes and give you a bird’s eye view of everything at once.

2. You Want to Automate Some or All of Your Payments

Please don’t say that you’re still writing out paper checks and dropping each bill in the mailbox. While it’s noble that you’re doing your part to keep postal workers employed, we’re 18 years into the 21st century and you can literally pay every bill online now.

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There’s no need to log into every account you have and type in your routing number either.

With personal finance software you can schedule automatic payments and transfers between all of your imported accounts. Automatic transfers will help to make sure you have the necessary funds in the right account to ensure all bills are paid on the appropriate date. Late fees are annoying and do nothing but cost you money. It’s time that you said goodbye to them once and for all.

3. You Need to Streamline Your Budget

Perhaps the best feature of personal finance software is that it allows you track everything going in and out of your virtual wallet.

Nearly every brand of personal finance software out there has easy-to-read graphs and charts that allow you track every cent you spend or earn, should you choose. You might be pretty amazed when you see just how much you spent on eating out last month or if you splurged a little more than you should have on Christmas gifts last year.

Every successful business on the planet has a budget and using personal finance software can help you trim the fat on your spending in ways that affect your everyday life.

4. You Have Specific Goals to Meet

Maybe it’s paying off debt or saving for up something like a European vacation. Whatever your financial goal is, whether it’s long-term or short-term, personal finance software programs are one of the savviest ways to go about reaching those goals.

You can do everything from set spending alerts to notify you when you’re over budget to automating what percentage of your paycheck goes to things like retirement investments. The personal finance software that you choose should show you exactly how close you are to hitting those goals at any given time.

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How to Get Started

From AceMoney to Mint and Quicken, there ’s no shortage of personal finance software apps out there. Many of these programs are free to download and will allow you to pay bills, invest, monitor your net worth and credit profile, and even get a loan with the swipe of a finger.

Other programs may only offer you limited services and will require a one-time fee or subscription to unlock all that they offer. These fees can often vary from as little as two dollars to 50 bucks a month.

It’s best to start off with the free version and then gauge whether you’re able to accomplish everything you’d like or if it’s worth exploring one of the paid options. Often times the subscription programs come with assistance from financial planning and investment experts — so that can be a real benefit.

When deciding which personal finance software program to use, it’s also important to look at how many accounts you wish to monitor. Certain programs limit the number of accounts you can add. Be sure that if you have checking, credit card, and investment accounts to monitor, that you choose a service that can monitor them all.

Finally, when looking around for the right personal finance software that meets your needs, make sure that you’re comfortable with the program’s interface. It shouldn’t be expected that you recognize every single feature instantly, but if the features don’t seem readable and manageable to you, then you’re not as likely to use it and get the full benefits.

Final Thoughts

Personal finance software can go a long way in helping you to take control of your money and meeting your financial goals. It’s important to note, however, that some focus more on budgeting and expense tracking while others prioritize investing portfolios and income taxes. Explore several different programs and read reviews to find the one that’s right for you.

In this day and age, managing one’s personal finances in a secure manner that allows the user to have a real-time visual representation of their money is easier than ever before. With the numerous applications that are out there — both free and subscription-based — there’s no reason that every person can’t take control of their money and ensure they’re making smart money moves.

Featured photo credit: rawpixel via unsplash.com

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