Information about forex trading is now widely available on various platforms, such as blogs/websites, forums, social media and so on. Someone can easily access this information through their computer or smartphone, wherever and whenever they want. It is enough to have an internet connection, you can get abundant information about forex trading.
Unfortunately, even though there is a great deal of information available, not all of it is true fact. There is a lot of information that instead of helping someone to be able to trade better, it actually leads someone to trade in the wrong way.
For example, on the internet there are several articles about martingale. They mention that martingale is a method of managing risk when trading. In fact, martingale actually makes trading much riskier than conventional methods. Apart from that, they also mentioned that martingale is not suitable for beginners because it is quite risky, even though no professional traders use the method because they know that it is not suitable for trading.
Apart from that, there is still a lot of information about forex trading which is actually just a myth and not true information. Out of nowhere, this information has basically contributed to a lot of chaos in the forex industry and is one of the factors that makes more people fail in the forex business than people who succeed.
So, in this article, we will discuss 5 things about forex trading that are just myths. What are you curious about? Let’s look at the discussion.
1. Forex Trading Can Make People Rich Quickly
In forex trading, one can indeed earn money in a relatively short time. For example, people who use the scalping method or have an intraday trading style, tend to complete their transactions in a short time. And if the transaction is profitable, it means they have made money in a short time.
In theory, in this way, scalpers and intraday should be able to get rich quickly. The problem is, both scalpers and intraday traders do not trade based on time, but based on opportunities. If there is an opportunity, then there is a chance to make a profit. But, if there isn’t one, then the trader won’t be trading and won’t get anything.
In addition, when making transactions, the trader is not always profitable. Sometimes it even loses in a row. So, it is true that traders can make money in a short time, but that is not always the case and in fact the opposite is true, i.e. traders lose their money in a short time. Therefore, forex trading cannot make people rich quick.
2. A Trader Can Make Money Every Time
The forex market is open 24 hours and is often mentioned as one of the advantages of the forex market compared to other financial markets, such as stocks. Based on these facts, many assume that traders can freely make profits 24 hours non-stop. Of course, that’s just a myth. The truth is, even if the market is open 24/7, traders may not be able to make a profit.
As discussed earlier, traders do not make transactions based on time, but based on opportunities. And these opportunities sometimes only appear a few times a week and even a few times a month, depending on the trading method used. In addition, even if there are 10 opportunities to make transactions in a day, it is not certain that all of these transactions will generate profits. So, traders cannot make money every time. And if you can, why isn’t the richest person in Indonesia or in the world a forex trader?
3. Trading Method with 100% Probability
Trading method 100% of course just a myth. It’s even hard to find a trading method with a probability of 60% to 70%, let alone 100%.
A trading method with 100% probability means that the method will always make a profit without experiencing any losses at all. Information like this, may be very interesting for beginners. They will usually get excited and try to find or make the method themselves.
But, for people who have been in the forex industry for several years. And already tired to do it, maybe slowly they realize that such a method doesn’t actually exist.
4. Professional Traders Never Lose
One of the myths circulating among beginners is that professional traders never lose. It starts with the sentence that to become a professional trader, one must be able to make consistent profits. And the phrase “consistent profit” is misunderstood as continuous profit, aka never loss.
Therefore, many novice traders diligently study various methods of technical analysis, buy trading books and so on solely in order to accurately predict various market conditions. So that when trading they can profit continuously without having to experience loss.
Unfortunately, of the many beginner traders who do it, no one has ever been able to make continuous profits without loss. And indeed there will never be anything like that.
5. Stop Loss Hunter Is an Institutional Trader
Many believe that Stop loss Hunter is an institutional trader. They think that institutional traders deliberately make retail traders lose by moving prices into areas where retail traders place their stop losses. These institutions do it to gain liquidity.
Unfortunately that doesn’t make sense. First, the transaction volume of retail traders is generally very low. Based on data for 2019, retail traders account for only about 5% of transaction volume for the forex market. Meanwhile, transactions from several large institutions even account for 46% of the forex market transaction volume. So, it’s impossible for institutions to need transactions from retail traders to get liquidity.
Second, neither institutions nor anyone else has access to see where other market participants’ transactions are. This is not possible systemically because forex trading is not done in a centralized market. So that transaction data from each market maker or liquidity provider does not cover all transactions in the forex market. It is necessary to collect other data from other market makers around the world to get a complete picture of who are the market participants in the forex market and where are their positions in the market.
Despite that, stop loss hunters may exist, but they are not institutional traders. The one that makes the most sense to become a stop loss hunter is actually a broker, especially a broker who doubles as a market maker or dealer. Because city brokers are in the opposite position to traders and they also have access to see the transactions we make and even manipulate them.
