There are a lot of Forex trading myths that are holding traders back. So in this post, I'm going to set the record straight on these topics and show you how these beliefs can prevent you from reaching your full potential.
If you find yourself resisting strongly against any of these myths, then that is usually one of the big things that's holding you back. It may take some time for you to come to terms with it.
But do your own research on the topic and find out for yourself.
1. Forex Trading is Easy to Learn
This is the biggest Forex myth of all.
There are 2 parts to this one…
Some people on the internet perpetuate this myth and that's how it spreads. They have YouTube channels named “Forex is So Easy” and other such nonsense.
Unfortunately, some people will do that in all markets. They will tell you that real estate investing is easy or that making money on eBay is easy.
In reality, it takes a lot of practice and hard work. Successful Forex trading is no different from becoming world-class at any other skill.
There will be challenges and failures before you start to see success.
The other part is that Forex trading seems easy. At first glance it seems like all you do is learn a system and follow the rules.
Nothing could be further from the truth.
Learning to trade doesn't have to be extremely difficult either, but it's certainly not easy.
2. All Brokers Run Stop Your Losses to Make More Money
I'll get this out of the way up front…
There are some shady brokers out there who might run your stops intentionally. They're usually located on a tiny island somewhere, with a government that's easily influenced (with a big bag of money).
So it's your responsibility to do your homework on the broker you trade with. If you want a good place to start, here are a few great options.
For the most part, a regulated broker in a major financial center of the world, won't run your stops. It's not worth the risk for a few extra pips.
The traders who usually complain about their stop getting intentionally triggered are new traders who set their stops too tight.
If you want to sound like a rookie, then complain about your broker running your stops.
To find out who does run stops, read this post.
3. All You Need is the Right Trading Strategy
Even the most profitable trading system ever created won't work for you, unless it resonates with your Trading Personality.
If a trading educator is only selling a system and doesn't provide any psychology coaching, then understand that you are only getting a small piece of the puzzle.
It will be difficult to trade that system without the right mindset.
A success oriented mindset will help you overcome setbacks, deal with frustration and do the work. Without this type of mindset, you will simply give up.
4. Dealing Desk Brokers Trade Against You (and Cheat)
Again, there may be shady brokers in some parts of the world that do this. So do your research before sending a broker money.
Yes, dealing desk brokers will be the counterparty to some of your trades. Some new traders misinterpret that to mean that they are trading against you.
Although they do make money if you lose, they are actually helping you out by taking the other side of the trade.
When there is a fast moving market, dealing desk brokers can sometimes provide better fills because they are providing liquidity and assuming the risk.
Since ECN or STP brokers route all client trades into the market, there may not be enough traders willing to take the opposite side of some trades. That means that you may get a bad fill, or not get filled at all.
A dealing desk broker can provide more liquidity, which is better for the independent trader.
There are pros and cons to dealing desk and non-dealing desk brokers. Learn what they are and which one is right for you.
5. More Confirmation is Better
Have you ever seen a chart like this?
I hope that's not your chart 😉
This is an example of a trader who is looking for the ultimate in confirmation. In other words, a 100% guaranteed winner.
First of all, if a trader is looking for this much confirmation, they probably won't take any trades because all of the indicators will never line up at the same time.
Second, this chart is so cluttered that the trader can't even see what the price is. It's hard to make decisions that way.
Third, there's no such thing as a guarantee in trading.
The vast majority of successful traders have a very simple strategy and are very good at applying it.
Which brings me to my next point…
6. Successful Forex Trading is Complicated
Successful traders use simple trading strategies.
So stop trying to make trading more complex than it needs to be.
Don't beat yourself up if you've been doing that. That's just how the human mind tends to work, we like to outsmart ourselves. Forgive yourself and get to work.
Be aware of your perception and find ways to change it. The best way to find out what really works is to start backtesting strategies.
You results will show you which is better…simple or complex.
7. More Knowledge is Better
Some traders get stuck in education mode forever and never place a trade.
They are always after the next bit of information because they think that they don't know enough yet.
In my experience, there are 3 primary reasons for this:
- The person sees trading as a purely intellectual pursuit. They don't actually want to risk money, and that's fine too.
- The person has a lack of confidence. They think that they aren't good/smart enough to be a trader.
- The person has a fear of failure. It's better to be good at trading knowledge, than to be bad at actual trading.
If you fall into category 2 or 3, then open a demo account and just start placing some trades. It's the only way to start developing skill.
A guitar won't play itself, you have to learn to play it.
Your trading account balance won't increase by itself either.
If you are in category 1, then cary on…
8. Trading Robots are an Easy Way to Make Money
Commercial trading robots (EAs) are completely worthless.
If you don't know how a robot works, how do you know when it stops working?
Most of the robots out there are over-optimized for a certain period of time. They do amazing in those types of market conditions, but they fail miserably when market conditions change.
On the off chance that you do get a robot that actually has a robust trading strategy, you'll probably turn it off at the first sign of a losing streak. Again, because you don't know how it works, you'll assume that it has stopped working.
Either way, robots are a recipe for disaster.
However, if you have a trading strategy that works and you want to automate it, then a robot is a great way to leverage technology to help you make more money. Since you know what the robot is doing, it's also easy to see when it needs to be adjusted.
To automate an existing strategy, talk to one of the programmers on this list.
9. You Shouldn't Have to Pay for Trading Tools and Education
You kids are spoiled.
Sheesh, I sound like someone's grandfather.
But it's true. When I started trading, almost none of this stuff was available.
Nowadays, there are so many fantastic, free trading resources out there that a lot of people think that everything should free.
Well, creating these products takes time and money and the creators have to get paid somehow.
You wouldn't go to work at your job for free, right?
Then don't expect others to work for free either.
Thinking that people owe you something is also a poverty mindset.
Sure, there are a lot of great free tools out there, use the ones that work for you.
But also be willing to pay for quality.
For example, MetaTrader is a great piece of free software. But I find that TradingView is much easier to use (especially on a Mac), so I'm willing to pay for it…as I talk about here.
Every once in awhile someone will comment on this video, saying that they like TradingView, but why does it cost money?
Blows my mind.
10. Psychology Doesn't Matter
Psychology is 90% of success in trading.
When you have the right mindset, you're able to overcome obstacles, find the right mentors and put in the effort necessary to succeed.
Traders that don't have the right mindset will blame others, trading strategies and their broker.
If you want to be a successful trader, then take responsibility for your trading and work on your psychology.
11. Trading Lower Timeframes Will Result in More Profits
In my experience, a very small segment of independent traders are cut out to be day traders. As we discussed here, day trading or scalping can cause brain activity that is similar to using drugs.
Traders can get a high from the excitement, but once the adrenaline wears off, they find out that half their account is gone.
If you aren't getting the number of trades that you want in a week, then simply add more markets or strategies.
Moving to a lower timeframe requires more focus and most people don't have the time to sit at a screen for a few hours straight.
12. Successful Trading Depends on Eliminating Your Emotions
I don't know about you, but I'm not a robot.
Therefore, I feel emotions.
A key to success in trading is to work with your emotions, not repress them.
You know what happens when you repress stuff right?
I think most of us know at least one person who went to a strict Catholic school in their youth.
…yeah, that's what happens. The repression tends to lead to overcompensation in other areas.
Instead, we should learn to work with our emotions.
Understand how you deal with wins and losses. Uncover the situations where are the most likely to take impulsive trades.
Even if you have a set of trading rules, they will all go out the window if you don't feel like following them.
The same thing goes for automated trading programs. Some traders think that computer programs will remove all of the emotion from trading.
That's not entirely true because you still have the ability to turn the programs on and off. If you let your emotions get the better of you, then that's when you will turn the robot off.
…and that's usually when it goes on a winning streak.
13. You Should Understand Exactly Why a Market is Moving
There are literally thousands of reasons why a market moves the way it does.
Independent traders are not privy to most of that information. Even people on the “inside” of these markets might not know what's really causing a market to move.
So it's useless to think that you can get all of the pieces of the puzzle, to be 100% sure when you take a trade.
But luckily, you can still do very well, even if you only have a few key pieces of information. Then take small losses when you're wrong and make big profits when you're right.
Learn what those key pieces of information are that work for successful traders and practice using them. It could be technical analysis, fundamental analysis or a little of both.
14. Successful Traders Shouldn't Sell Their Education
Let's say that you want to start a business…whatever sounds good to you.
Maybe a flower shop.
Would you work on that business for free?
Of course not.
Well, trading education is a business too.
So why do some people expect traders to work for free?
Those trading educators create products and should be paid accordingly, just like any other business.
The fact that those educators are also successful traders is irrelevant.
15. You Should Only Learn From Successful Traders
There's obviously value to learning from a successful trader. However, you should also consider if that trader is also a good teacher.
Those are two entirely different skills.
History has many examples of elite athletes that failed as coaches. On the other hand, there are many legendary coaches, who never played at the level that they had their coaching success.
Also consider that your best mentor may not be a trader at all. If you work with someone who can improve your mindset for example, that might be all you need to succeed in trading.
So keep your mind open to who you learn from.
16. You Should Always Trade with a Stop Loss
I used to believe that all trades should have a stop loss.
Then I discovered hedging and I realized that there are some scenarios where you don't need a stop loss.
Sure, you should always control your risk, but you don't necessarily need a stop loss to do it.
I know of a few successful traders who don't use a stop loss. They manage their trades with a mental stop and they watch their trades very closely.
That works for them.
Find what works for you.
17. Successful Traders Predict Market Moves
You will see a lot of market predictions on the various Forex forums on the internet.
“I think the USDJPY will go up because of _______. ”
“The chart is forming a head and shoulders pattern, so I predict that the market will go down.”
…or my favorite…
“My gut tells me that the price is going to go up.”
Lazy people will also ask for market predictions.
That's not the way trading really works.
Good traders react to favorable market conditions, they don't predict them. There's a subtle difference.
They understand when they have an advantage and only trade when the advantage is on their side. When there's no advantage, they stay on the sidelines.
If they are wrong, many are also willing to quickly reverse their position.
But new traders try to predict market moves and usually stick to those predictions until their account balance goes to zero.
18. Trading More Markets Means More Profits
Not necessarily. If you start trading 50 markets because you think that's the only way to be successful, then you might burn yourself out.
Sure, if you aren't getting enough trades a week or month, then consider adding more markets.
But don't add more markets just because you think that's the only path to success.
I know a couple of traders who only trade 1 or 2 markets and are very successful.
More is not always better.
19. A Talented Money Manager Will Make You Rich
Having someone else manage your trading capital is certainly a good option.
More often than not however, I've found that people find it hard to work with even the most successful money managers.
This is because there needs to be a deep level of understanding between the client and the money manager. Many clients expect the moon, and when that doesn't happen right away, they pull their money out of the fund.
That's why this guy recommends that potential clients only invest in his fund when he's in a drawdown.
But if you take the time to get to know a money manager, understand what kind of performance to expect, and you're in it for the long run…then it might just work.
These Forex myths are repeated ad nauseam throughout the internet, so some new traders think that they are the truth.
But in most cases, they are completely false, and are extremely limiting beliefs.
My comments above will help you on the right path, and are the result of my experience in trading since 2007. But don't take my word for it, do your own research and find out for yourself.