Below you will find the six common beliefs that most traders follow, and if you also believe these myths, they will limit your chances of making significant profits in forex trading.
Ninety percent of forex traders believe at least one or more of these myths, which explains why ninety percent of traders don’t make a lot of money trading currencies.
1. You should always be on the market in case you miss a move.
Traders love the excitement and their opinion is that if they are in the market they could catch the big move. Yes, but they probably won’t.
Big trends only happen a few times a year in each currency and you have to stay out of the market until they happen, otherwise you will suffer losses and accumulate commissions that will drain your account.
Wait for the big trades – Patience is a virtue in trading.
2. Diversification reduces risk and increases profit potential
Diversification simply dilutes your earnings.
You made a big move and your other trades that lose, or bring you only marginal profits, consume all of your forex trading profits.
You need to have the confidence to make the big moves, when they happen, and charge those trades.
Forex trading is about calculated risks – if the trade looks good, go hard for big profits.
3. Intraday trading is better than following the long-term trend as it is less risky.
Many brokers spread this myth, and why not? – They run more errands if you believe it!
You will end up having more losses than profits on your operations. You will never make enough money in one day to cover your inevitable losses. When you add commissions and slippage, you are bound to lose.
Long-term trends need to be maintained as they produce large profits to cover smaller losses.
4. Market timing is the right way to profit
Timing the market means you’re trying to FORECAST where prices go up and down; this is not a good way to trade and the odds are stacked against you.
A better way to trade is to wait for the market to CONFIRM that a trend is underway and jump on board. You may not buy the bottom or sell the high, but you can catch the main part in the middle, and with currency trends lasting many months or years, you can still get a lot of profit from the trend.
5. Today’s markets are the same as hundreds of years ago.
Nonsense! The trends are much more volatile now than they were 50 years ago. Why? Today, with the Internet, price information reaches every corner of the world in a fraction of a second. This increases volatility since everyone has the same information at the same time and everyone tries to enter the market at the same time.
It wasn’t like that 50 years ago – the trends are still there, but the volatility is much higher – traders go in the right direction of the trend, but are held back by volatility. How many times has this happened to you? – It happens to all merchants. Consider using options to get stronger.
6. You can use a Black Box system to earn money
You can buy a system from a vendor for a few thousand dollars and you can make a profit of 50-100% per year.
These systems typically have a hypothetical history and use pricing information where the results are already known and of course the logic of the system remains hidden from you as it is unlikely that you have a solid foundation.
Have you ever wondered why these vendors sell systems, when they could simply apply for a bank loan and trade in their systems?
Enough has been said about this!
How about some positive advice?
If you want to make big profits from forex trading, you have to do it yourself.
Get a plan you trust and execute with discipline and dare to trade for big wins when they happen.