This post was last updated on September 10th, 2020 at 01:10 pm
Whether you’re a forex professional or a total beginner, you will need some time and effort to adjust to the Forex environment. Also, you should learn more information about the specificity of Forex. In the list below, you will find the biggest myths associated with this trading market. This post is all about demystifying common myths about forex trading.
Myth #1: Forex is a short-term strategy
The aspects that underpin market movements on foreign exchange are related to the macroeconomic environment. While the daily news can lead to volatile swings, there are still long-term processes that exist in many currency pairs. Thus, having a currency strategy that considers these long-term processes is crucial for maintaining stable cash flow and operating an international business sector.
Myth #2: Your prediction is the way to success
Predictions can lead to decreasing attention to the actual market processes due to cognitive bias. Considering the basics of behavioral economics, you’ll most likely end up observing only what you want to see. At the same time, you will stop adapting to what’s going on in real-time in the market. With a forecast or a level in your mind, you increase your chances of success. But many people become too emotional when they cannot stick to their plans. To make your forecast work, you should detach from emotions by assessing your strategy and having an alternative option. In other words, you should have “Plan B” in case something goes wrong with your actual strategy.
Myth #3: The forex market is full of risky
Many people have the wrong impression that the foreign exchange market is a risky business to manage. The reality is that any market, any investment, and any trade cannot be successful without constant assessment. A specific level of risk is even necessary in order to achieve the best outcomes. Rapid growth is usually associated with the higher chances of accepting more risks whether it comes to trading currencies, stocks, bonds, or real estates.
Myth #4: Risk management will cost you’re a fortune
A common myth is that it’s expensive to develop and integrate a currency strategy to minimize risks. Operating foreign exchange processes is the best way to make sure that your business can be successful with stable cash flow in the case of currency volatility.
Or instance, OFX provides special risk management instruments like forwarding Exchange Contracts, which allow traders to keep a favorable exchange rate and transfer funds at that rate within one year. The benefit of using this instrument is that it costs nothing and requires no deposit. If you need to cancel it, there is no penalty that you have to pay. At the same time, there are some limit orders that allow you to choose a target rate for the team at OFX. This can be done to maintain the markets and check if the desires results are reached. Luckily, there are also no extra expenses to be assigned for booking and canceling.
Myth #5: Learning a trend is a must
There are many things to be learned about the major factors affecting exchange rates. Most traders make a profit from focusing on specialized pairs and gaining a solid understanding of the major relationships. Many beginners at the Forex market look at historical data and long-term relative exchange rates to identify the actual value of traded currencies. Specialists in Forex know the basic things about market relationships, including the commodities determining the value of the AUD. Thus, Forex is affected by the current events taking place globally.
New governments and trade regulations, political and military turmoil, and current economic policies will always determine historical assessments in terms of pricing currencies.
The Bottom Line
Generally, using foreign exchange as an element of your overall investment portfolio or managing the ebbs and flows of running an international operation can be a smart approach to the Forex operations. Anyway, staying informed is a crucial thing that cannot be ignored. Global money transfer experts from OFX offer comprehensive market news on all the popular currency pairs. With the Currency Outlook, you will be able to get deeper into details of the major currencies like AUD, USD, GBP, and so on.
The most common myths addressed in the given post are only some of the many floating misconceptions taken from the forex world. When your Forex career starts running up, you will have to deal with even more myths about the internal processes. When you don’t trust in your Forex broker (eToro, FxPro, or FxOpen), you should not rely on this knowledge. After all, you put your money at stake. It won’t be nice if you lose all of them at once.