In recent years, with the rise in various financial markets and even the crypto market becoming a hot topic of conversation, a lot of attention has been drawn to traders and trading.
But with this topic officially entering the public domain, countless misconceptions and misguided ideas have formed around it. So in this article we want to clear out the major misconceptions that exist in people’s minds about trading and also traders.
Additionally, we are going to focus more on the Forex market. But the following misconceptions can be extended to any financial market that involves trading.
You Can Become Rich Quickly with Trading
In this list of misconceptions, perhaps it would be difficult to tell which one is the biggest lie. But becoming rich quickly comes pretty close to it. Unfortunately, many people believe that trading is a direct route to becoming rich very quickly.
When in reality it takes a whole lot of dedication and patience to learn the knowledge and skills related to trading. Trading is not a glamorous and easy way to make some quick bucks.
Traders who have become successful have gone through all the difficulties and hardships related to the path of trading. Never look for the easy way out.
You Cannot Invest in the Forex Market
This misconception is true about most markets. People believe that financial markets such as the foreign exchange market is not a good place for investment. In fact, the prevailing opinion is that you need to be sitting behind your computer all day and making trade after trade in order to make money from trading in forex.
These forms of strategies rely on long-term market patterns that can make trading similar to investment.
Nobody Can Predict the Market
Some people who stay away from trading do so because they believe the market is unpredictable and nobody can forecast future patterns. Even some existing traders are of this opinion.
Such an opinion is true and false at the same time. It is true because all markets are to some extent unpredictable. It is wrong because it is too pessimistic.
The reality is that despite all the complex nature of the financial markets, given the right approach to analysis, it is possible to make rather accurate predictions about the future.
The forex market is governed by both small and short term movements that can be detected through technical analysis and also by long term movements that can be analyzed through fundamental analysis.
More Trading Means More Money
Another common misconception about trading is that professional traders are trading around the clock and executing numerous trades in the course of one day.
But that is not true. Skilled traders know exactly when to back out. There is a right time to pull out and stay back. In fact, there are days that professional traders avoid trading altogether.
To become a successful trader, it requires you to know when to enter the market and also when to exit.
You Need Complicated Techniques for Trading
Those who have not entered a financial market think that trading takes a whole lot of complex techniques and strategies. While that is true, it is only true in the case of traders who have been in the market for a very long time.
Those who are only beginning their journey of trading will definitely not be faced with long strings of formulas to analyze and predict the market.
In fact, when someone wants to begin trading, it is always advised that they start simple and with a straightforward strategy. Naturally, that will yield small returns. But as time goes by the trading strategy can be more and more detailed and profits will also accumulate.
Trading Requires Math and Complex Knowledge
This misconception comes from the image that is usually shared from and also by professional traders online and on social media. You look at their picture and all you see are notebooks and pieces of paper full of formulas, numbers, calculations, and complex digits.
That is why a lot of people believe that trading requires complex knowledge of mathematics. However, that is yet another misguided thought.
It is true that trading does entail a certain amount of calculations. But at the end of the day, all the calculations that you will be doing do not require you to have a bachelor’s in mathematics.
There are countless tools and programs that will carry out the calculations for you.
Trading Is Either Too Easy or Too Hard
This misconception is derived from a place of overestimation or underestimation. Both of these states of mind are a trap or mental bias created by people to make excuses for their lack of trying or their failures.
Those who believe trading is too hard use this as an excuse to stay away from the forex market or other financial markets in general. And they have a wide variety of reasons as to why they believe so.
On the other hand, those who believe trading is too easy are not being realistic enough about the working mechanisms of the financial markets.
The truth is trading is not too easy nor too hard. It is exactly what you make of it.
You Need a Lot of Initial Equity to Start Trading
One of the reasons people stay away from trading is that they think they need a lot of initial equity to bring with them into the market. And that otherwise they wouldn’t be able to make profits from trading.
As with some of the other misconceptions, there is a side of truth to this matter. It is true that the more money you have at first, the more potential profits you will make.
But at the same time, it doesn’t mean that the market is exclusively reserved for the vastly wealthy. You can start trading with however much money you have.
In fact, some forex brokers will allow you to start with only hundreds of dollars.
Trading Is a Fraudulent Domain
This is another misconception born out of weakness. There are those who will always make excuses for their lack of trying or lack of success.
This is why they believe trading is a domain filled with fraud and people who only want to lie and cheat. They think these people will rig the market in their own favor, leaving all the rest behind with nothing but losses.
Trading Takes Too Much of Your Time
Last on our list of misconceptions about trading has to do with timing. Many people believe that to become a trader they need to dedicate their whole lives to trading.
While you certainly can do that and some people have actually done that, there is absolutely no need to do so. There are many different forms and types of traders. Some types will take longer and dedicate more time to trading. But in fact, you can begin trading even in your spare and slightest amount of time.
Trading is shrouded in mysteries and misconceptions. The reason for this has to do with the high interest that has been attracted to this field. However, these misconceptions are just that. Misguided thoughts and beliefs that have no basis in reality. If you want to start your journey as a trade, make sure to do your own extensive research to find out the correct information instead of lies.