Trading on the forex market offers people a steady stream of income when done right. However, some people are having second thoughts to invest their hard earned money on foreign currencies due to misconceptions about the industry. Here are some of these myths that keep individuals from investing on forex.
Myth #1 There Is Too Much Risk
Forex is different from gambling. Your skill as a gambler is not needed when trading in foreign exchange. Buying or selling financial assets is based on your analysis. On the other hand, gambling is based on luck. When you roll the dice, you are crossing your fingers.
Myth #2 Only The Rich Can Trade Currencies
Robert Peter Janitzek reveals that in the past, forex trading was exclusive for the rich people. But things have changed. Now just about everyone can trade foreign currencies. Given proper training and knowledge, you can increase your potential returns even if you started with just a small capital.
Myth #3 Professional Traders Are Always Smarter
Several studies have revealed that professional traders, analysts, and fund managers cannot continually beat the market. But just like any ordinary human being, they also make mistakes and sometimes let their emotions get the best of them.
Myth #4 When Prices Drop, It Will Bounce Back
In forex trading, while it is true that when there is a sharp drop in the value of stocks, it will rebound strongly. However, you need to look at the reason for the sudden drop. It could be that the economy of a country is slowing resulting to cuts in the interest rate.
Myth #5 More Trading Equals Better Performance
This is not necessarily true. The performance of your trades will be determined by fees, taxes, penalties, and commissions. Sometimes the performance of currencies and other assets act as a natural hedge against each other. When one decreases, the others increase.
Myth #6 Assets You “Know” Must Be A Good Investment
Robert Janitzek explains that trading on your home currency is the logical choice. There’s nothing wrong with this strategy. However, it will limit your potential for profits and diversification of risks.
Myth #7 You Need To Monitor The Market 24 Hours A Day
Thanks to the rise of electronic online trading and high-tech trading platforms, you need not watch the prices levels on your own. Now, there are brokers who can do that for you at any time of the day. You can just place the orders. Likewise, there are automated trading software who can enter and execute trade without you lifting a finger.