5 Common Misconceptions About Forex Trading
Typically, when we at Alpha Trading Floor hear people who aren’t already working with the markets in some way talk about Forex trading, what they’re saying bears little relation to reality – if any. We’d like to remedy that, and so in this article we’re going to take a quick look at five of the most common misconceptions.
1 Forex trading requires you to work in the Stock Exchange
If you’re British, you must be in the City of London; in New York, the New York Stock Exchange, and so on and so forth across the world. The various big financial exchanges became major players in national and then international finance before modern communications technology was established, and they were simply ways for multiple people to access the same information flow.
As electronic communication became cheaper, being near to a central source became less necessary, and the easier it was to trade without being in these places, the more people have done so – and that reduces any other advantages those locations have.
2. Forex trading isn’t just a full-time job, it’s something that has to occupy all your waking hours if you want to be a success
Again, this simply isn’t true, but perhaps the best demonstration of that comes from our testimonials – and our very existence; our Head Trader, Hemal Pandya, both trades and trains, and does so successfully. If making money in the markets took up all of his time, Alpha Trading Floor’s training programs would be impossible.
3. Forex trading is all about short-term high risk transactions
There are many seasoned traders who’ve gone broke because they still clung to this misconception, and therefore all their money is constantly moving from one short-term gamble to another. However safe you think these short-term plays may be, it only takes a few turning out not to be so safe before your investments aren’t looking very strong at all; it can really pay to keep some of your money invested in reliable if slower areas.
4. Trading based on headlines is the key to quick money
It can be done, but when it happens, it’s usually luck! Just after the news breaks there’s almost always a moment where you have to free some liquidity for the trades, and once that’s done, you won’t be the only one looking to take advantage and prices will already be rising. Far better to trade based on developments you can see coming – and if you find yourself suddenly positioned for a favourable trade as a headline breaks, there’s nothing wrong with taking advantage.
5. Let your best investments ride
If you’ve got a long-term plan, this can be the way to go, but otherwise, when a trade has just paid off well, you should always ask yourself if you can expect another big return before letting it ride. It’s a bad idea in gambling, where you’re purely subject to chance, but the fact that good judgement can help makes a lot of people forget what ‘risk’ actually means – and it does mean that things can go very wrong.