Despite being regarded as being part of the financial market’s underbelly, the foreign exchange and currency trading has emerged as a prominent global institution. Even as the practice continues to be investigated and subjected to more stringent regulations, it continues to expand and has now reached a point when an estimated $5.3 trillion is exchanged on a daily basis.
So while forex trading can hardly be considered as an unknown entity, it also continues to be surrounded by a number of myths, half-truths and significant misconceptions. Many of these are based on the historical understanding of the forex market, and reflect the trading environment that existed before the advent of technology and online innovation. The modern forex market is an entirely different proposition, however, and one that offers a far more welcoming and even platform from which inexperienced investors can look to ply their trade.
The Three Biggest Myths of Forex Trading
With this in mind, which long-standing myths cast the most significant shadow over the practice of forex trading? Consider the following: –
- You Require HugeSums of Money to Create an Account: Prior to the current age of social, technological and economical evolution, the forex market was an exclusive and inaccessible place. Only representatives of leading financial companies or those with an extremely high level of disposable income could trade effectively, while access to any technical indicators or analytical tools remained beyond the reach of aspiring part time traders. This is no longer the case, however, as trading accounts can be opened with just a few hundred dollars while online platforms can provide instant access to a comprehensive range of tools that can assist inexperienced investors.
- It is hpw Impossible to Predict Price Movements in the Forex Market: Even ignoring the fact that some online trading platforms offer up to 30 individual technical indicators and additional tools for analysis, predicting price movements in the forex market is not an impossible challenge. Although it is an undoubtedly volatile and occasionally hostile environment, the forex market is influenced by a number of fundamental laws and economic indicators that can be easily understood over time. The role of a forex trader is to build their knowledge base and develop an investment strategy that they are comfortable with, so that they can forecast price movements and market shifts.
- Forex Trading is Not Suitable for Inexperienced Traders: In reality, all financial markets and trading methods carry a certain level of risk. While forex trading is no exception to this rule, the liquidity and flexibility of the market does provide certain benefits that are suited to new or aspiring traders. Not only is it a margin based investment method that can deliver high returns on just small investments, but traders can also profit in a falling market by selling short or buying long. Above all, forex trading platforms are renowned for their exit strategy features, which allow users to automatically cease trading once they begin to incur losses.
Although the volatile, murky and challenging nature of the forex market cannot be denied, it is not the oppressive or restrictive environment that it is often portrayed as. Instead, it can deliver significant opportunity and financial returns to aspiring traders, especially those who show a commitment to learn and use the technology at their disposal in a responsible manner.