The 4 Ridiculous Rules about Forex Trading

The 4 Ridiculous Rules about Forex Trading

Introduction: What are some rules about Forex trading that you think are ridiculous?

Forex Trading is not a simple job to do. It involves proper education and discipline, but it doesn’t mean that you should get stopped by that fact if you’re a rookie. 

In this article, we’ll discuss most misconceptions about forex trading and what are the solutions that you can do in order for you to circumvent that. 

Ridiculous Rule #1: You Shouldn’t Trade Forex if You’re a Rookie

boy in orange helmet and blue and orange jacket

 

“The Forex market is a volatile and risky one. If you are a rookie, it is advisable not to trade Forex.”

Yes, this is true if only you’re using a live account with actual money on it. Everybody has to begin somewhere, right? That’s why some brokers took the initiative to welcome rookies into Forex trading with no risk possible. “Demo” accounts was created entirely for those who wants to practice trading or trade their strategy. If you’re a rookie trader, then this should be your first step. 

The thing is, you have to devote time and consistency as if you are trading your actual money. This is to make sure that your strategy, consistency, habit, and discipline are in place. Usually, rookies take about 3 months of Demo trading before they proceed with “Live” trading.

Ridiculous Rule #2: Trading the Wrong Currency Pairs Will Get You in Trouble

10 and one 10 us dollar bill

While this is true in so many ways, it is, however, doesn’t always apply to everyone. You can definitely trade with whatever currency pair you like, as long it aligns with your strategy. 

Your strategy would determine if trading a certain currency pair will be profitable for you or not. To determine the profitability, you must do your own backtesting or forward testing using a demo account. 

Be aware that some currency pairs do provide low liquidity and a high gap between buying and selling prices. In this case, the profitability and risk would vary, depending on the economic situation and the strategy that you’re using.

Ridiculous Rule #3: Only Institutional Traders Can Make Big Money in Forex

landscape photography of buildings

While institutions generally have higher capital than most retail traders, they do in fact, generate more money in monetary value. If we’ll discuss the percentage growth, the answer is that the possibility of retail and institutional traders matching that parameter is relatively high. 

While some retail traders do have a higher risk tolerance, institutional traders do need to keep track of their risks frequently according to their institution’s policy. This means that some retail traders could surpass the growth percentage of institutional traders just because their approach is in a high-risk-high-reward basis. 

Let’s not disregard that institutional traders have such sophisticated economic news sources that give them so much leverage in trading. They normally receive the news first before the ordinary traders do. If you wish to match their advantage, you’ll have to pay for the premium, of course–if ever you’ll find that kind of service that matches the quality of news and research that a typical institutional trader receives…if there is any, you’re in luck. 

Ridiculous Rule #4: The Trend is Always Moving Upward or Downward

person holding black iPhone displaying stock exchange

While the saying “The trend is your friend” is being overused in trading, it is actually a good foundation on which to base your technical analysis. The problem is, that there are market cycles that some traders rarely notice firsthand during their trading period. 

It’s a good strategy for you to follow the trend if you’re a rookie trader since it’ll add less complication to your trading methods. Most of the time, the strategy of simply following the trend works.

The thing is, whether you’re a short or long-term trader, trend reversals do happen and there are many ways on how you can anticipate that–by using technical indicators and/or fundamental analysis. 

 

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