Top forex myths. There are so many myths about Forex these days that AtoZForex decided to choose the most popular ones and reveal the truth behind them.

Top forex myths

Top 5 Reasons why Forex is the Best Market to Trade 🔥

Top forex myths. Whether you're a forex pro or a total newbie, it can be hard to tell the fact from the fiction when it comes to foreign exchange. Check out our list of the biggest forex myths, so you can steer clear of the hype and make an informed decision.

Top forex myths


Edward Ingram's ideas are a paradigm shift in the behaviour and management of economies. Ageism damages society and costs us talent and skill, says Mandi Smallhorne. The most votes do not always equal the best candidate, says Musi Kuzwayo.

Foreign exchange as an asset class is important because it is the most liquid and largest market, and is how money is transferred around the world. Forex trading can also be used as part of a trading strategy where your portfolio may be overexposed to one currency and you wish to diversify, or if you believe that a currency will devalue due to political or economic events.

Say, for example, you have R10 and want to take a position that the rand will depreciate against the dollar. The exchange rate is R On a one-to-one basis, if you bought the actual currency, that would give you a profit of R, but, with gearing, you buy exposure to the movement of the currency, not the actual currency.

As you are only buying exposure to the currency, the broker can offer you a leveraged position where, for example, your R10 gives you R worth of exposure. In this example, your rand exposure increases from R to R m so your profit is R3 If the rand strengthened to R13, your loss on R10 is R3 — more than a third of the value of your initial outlay.

If the rand suddenly strengthens to R In this scenario, the gearing was 10 times the amount, but the higher the gearing, the easier it is to lose money. The get-rich-quick schemes will often punt high gearing as a way to double your money overnight, but what they never tell you is that a single trade can wipe you out — and no one gets it right consistently. For example, if you used times gearing so that your R10 bought you exposure of R1 million, and the rand strengthened to R13, you would lose R37 — three times the amount of your investment.

This is the type of headline that has given forex trading its mythical status as an opportunity to get rich. Jacobsohn acknowledged that, if he had been investing his own money, he would not have taken the gearing and risk that he did during the simulated trade. As Simon Brown of online financial education site justonelap. If you are not willing to do that, you will have an accident. Duncan adds that many of these courses or online forex platforms convince you that they have algorithms or trading systems that can beat the market.

The reality is that they are trading aggressively and closing positions daily, which just adds to the cost of trading. So, basically, a platform that encourages a high trading strategy is there to make money out of you. There are many companies that claim to be able to guarantee returns from forex trading.

They usually claim they have an algorithm or robot that allows them to do this. The recent arrest of the founder of forex trading company Profit Trading illustrates how spurious these claims are, and that these companies are usually fronts for elaborate Ponzi schemes. In the case of Profit Trading, an investigation by the Financial Services Board found that not one trade had been placed.

Duncan says that markets are highly efficient and even if someone has developed an algorithm, by the time it is widely marketed, the market will have discovered it and be trading against it.

For someone to pretend they have developed a system that consistently produces profit is impossible. The very nature of trading is that you win some and lose some, so a claim that a fund can deliver a constant monthly return is false and a warning sign that it is a scam. Get used to trading without gearing: Duncan believes that a new trader should start with geared forex — they need to first get used to trading on a non-geared basis.

There are different instruments you can use to get exposure to foreign exchange without gearing, such as the Absa NewWave currency exchange traded notes, which give you exposure to dollars, pounds or euros without using your foreign exchange.

You could also invest in exchange-traded funds that invest in international indices through CoreShares. Trade virtual money first: If you insist on taking a short cut and go for geared forex trading, at least start with simulated trading. However, only do this on a trusted platform because there are many scams on platforms that falsify your trades and make you think you are making, thereby luring you into committing real funds.

Only use credible platforms: All of them use the Saxo Bank trading platform, but offer different interfaces and educational tools that can include online tutorials. The benefit of trading through stockbroker platforms is that you also have access to international shares and exchange-traded funds.

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Let us help you. Why textbooks are wrong Edward Ingram's ideas are a paradigm shift in the behaviour and management of economies. The bigotry of ageism Ageism damages society and costs us talent and skill, says Mandi Smallhorne. Friends and Friction The most votes do not always equal the best candidate, says Musi Kuzwayo. All data is delayed. We sincerely apologise for any inconvenience caused and hope to be up and running again this evening.

Thank you for your patience in this regard. The myths and truth about forex trading Jul 23 He says that the marketing of forex trading as a way to get rich quickly is misleading. How to legitimately trade forex Get used to trading without gearing: Global Trader and IG. You can build up a more holistic portfolio than just forex trading if you wish to.

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