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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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Published on July 4, 2018

Top 10 Recommendations on Money Management Apps

Top 10 Recommendations on Money Management Apps

Don’t want to overspend your budget, swipe your credit card too many times, and feel like a financial mess? Instead of beating yourself up for the bad financial decisions you’ve ever made, create a new plan!

The solution is simple, save more and spend less. But, we all know it’s easier said than done.

One problem is finding quality apps that save you time and money, and aren’t just hype.

Luckily, there’re many great money management apps available at your fingertips. Here are 10 reliable money management apps that can help you save money, and crush debt.

1. Personal Capital

    When was the last time you’ve tracked your net worth? Probably months ago or maybe never. Personal Capital allows you to easily track your net worth and plan for retirement.

    Here are some of its main features:

    • Sync many investment accounts, and expenses (mortgage, credit cards, etc.) in one place
    • Discover hidden fees and how much they’re affecting your retirement plan
    • Wealth management for investors requiring a long-term strategy

    With Personal you’re free to track your expenses and net worth.

    Available for: iOS and Android

    2. Mint

      If your smartphone could only install a few apps, Mint would be one of them. Why? Because Mint tracks all your balances and bills in one place.

      Here are some of its main features:

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      • Effortlessly track all your bills and balances in one dashboard
      • Categorized expenses to understand where you spend your money
      • Uncover hidden fees, and determine your investment style with sophisticated retirement tools.

      Feel at ease with managing your money by a reputable company that isn’t going anywhere.

      Available for: iOS and Android

      3. YNAB

        Everyone needs a budget, there’s no way around it. YNAB (You Need A Budget) is an easy to use app that will change the way you think about money. Their motto is to “give every dollar a job”, and you’ll quickly discover why.

        Here are some of its main features:

        • Easily sync all bank accounts in one place
        • Visually see your debt paying progress with eye-catching charts and notifications
        • Customized categories setting saving goals

        The best part about YNAB is the community that comes along with it. You can hop on the YNAB forum to receive support, listen to the YNAB Podcast or stay tuned for their weekly videos.

        Available for: iOS and Android

        4. Wealthfront

          Albert Einstein once said “compound interest is the eight wonder in the world”, and for a very good reason. The problem is, most people are scared or unwilling to learn the basics of investing. This is why Wealthfront is the perfect solution for the hands-off investors.

          Here are some of its main features:

          • Variety of investment account options including IRA, Roth IRA, and more
          • Your portfolio composed of 7 different asset classes
          • Automatically rebalanced portfolio
          • Daily tax loss harvesting

          Wealthfront is perfect for people requiring investment guidance, or prefer a hands-off solution.

          Available for: iOS and Android

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          5. Clarity Money

            If you’re staying on top of your budget but want to take your finances to the next level, Clarity Money can help you. Clarity Money helps you stay under budget and build a personalized savings plan.

            Here are some of its main features:

            • Easily cancel subscriptions with one click
            • Synchronize bank accounts fast
            • Transfer money effortlessly between different accounts

            Clarity Money isn’t an app that does it all. But, it does make transferring money and canceling subscriptions fast and efficient.

            Available for: iOS and Android

            6. Acorns

              What if there was a way to quickly gain confidence in investing your money, without too much risk? There is, and Acorns is your solution. With Acorns’s technology, you’re able to make investments as small as $5.

              Here are some of its main features:

              • Automatic contribution option
              • Customized portfolio tailored to your needs
              • Low management fees ranging from $1-$2 per month

              Stop wasting dollars on expensive coffee. Instead, invest them towards a brighter financial future.

              Available for: iOS and Android

              7. Albert

                Do you budget by only subtracting your expenses from your income? If so, how would you discover any overpayments or extra money you could save? This is where Albert shines, and it does it all free.

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                Here are some of its main features:

                • Receive notifications for overpayments, hidden fees, and low balances
                • An Automatic budget that’s built around your spending and income
                • Easily track debt and set new financial goals

                While Albert does offer a paid option, most of its core features are FREE. So, what better option to save?

                Available for: iOS

                8. Prism

                  Have you recently forgot to pay a bill because life got in the way? Prism automatically tracks your bills and syncs your bank accounts in one place.

                  Here are some of its main features:

                  • View all your account balances in one glance
                  • Bill due dates are automatically pulled and tracked
                  • Receive early reminders for upcoming bills

                  If your budget is on “fleek” but can’t seem to stay on top of your bills, Prism is your go-to app.

                  Available for: iOS, Android, Windows, Amazon

                  9. Mvelopes

                    Remember hearing about people using envelopes to budget their money? Well, Mvelopes is the new envelope system for this generation. Easily create monthly budgets and track your saving goals.

                    Here are some of its main features:

                    • Connect unlimited bank accounts
                    • Real-time budgeting with auto transaction syncing
                    • Low monthly $4 fee or $40 annual

                    Mvelopes can help you crush debt, save more, and help you stop overspending. With its low monthly fee, it’s worth a try.

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                    Available for: iOS and Android

                    10. Wallaby

                      Most people don’t have time to track their credit card’s changing rewards and interest rates. Because of this, you need help reaping the most of your credit card’s rewards. Wallaby is the app that will help you do just that.

                      Here are some of its main features:

                      • Automatic recommendations for the best credit card to use for each transaction
                      • A friendly user interface, displaying credit cards with their corresponding images
                      • Free to use

                      If you’re using the same credit card to make your purchases, you may be leaving money on the table. Give Wallaby a try if you’re ready to maximize your credit card’s rewards.

                      Available for: iOS and Android

                      Take control of your finances and experience financial freedom

                      Picture yourself staying on budget and saving more money than you’d ever imagined.

                      It took hard work and dedication but you’d finally learned how to manage your money. You have to start taking control of your spending and saving habits.

                      You now have a list of reliable apps that can help you build better money habits, what are you waiting for?

                      Featured photo credit: Pexels via pexels.com

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