Exposed: 4 Forex Lies Pounded Into Us From The Beginning

Like anything else in the financial world, the Forex arena isn’t void of lies and stupidity. Just cruise around the Forex forums out there and you’ll see it. Today, I want to share 4 Forex lies told to our community that many beginners tend to believe. Avoid these at all costs.

Lie One: You can make a high rate of return (like 5%) daily

While technically possible, this mindset is amateurish at best. To get a 5% ROI daily consistently you need to be trading a lot (something that kills 99% of the people out there) and you need to be way, way, way over leveraged.

Treat Forex like a casino and that’s exactly the experience you’ll get. They don’t build billion-dollar casinos in Vegas off the backs of winners.

If wealthy pros would be happy with 10% or so growth per year in the stock market, why should we shoot for half of this in a single day?

Lie Two: You need 50 million indicators, lines and other junk on your chart to make money

Absolutely, flat-out wrong. In fact, having too many items on your chart will just confuse you and your chart will lie you.

You can make money in Forex with nothing on your chart but the price history itself. I don’t know how many predictions I’ve seen just this past week that were based on charts that require 9 monitors just to see everything—most failed.

Go ahead and develop your own system. All I’m saying is complexity isn’t required. You may end up with a naked chart or a chart with 2-3 items on it and that’s fine. Last week I added a short position to the USD/CHF that was based on the simple fact that the price is going down and will probably continue to do so until something turns around or intervention comes. See, simple right? That position made me money.

The point here is beginner currency traders usually feel like if a chart isn’t complex or using a certain indicator it’s somehow wrong. Don’t buy into the lie.

Lie Three: You must trade all the time and be up for [insert market here] to make money

Again, nope. Most people (perhaps even you) are not cut out for day trading Forex. Oh sure, everyone likes to think they are, but they’re not. It’s sad when someone on a forum is talking about scalping 5-10 pips and then missing the huge 100+ pip run.

If you’re new to currency trading, I recommend treating Forex almost like traditional stock investing (to a point).

At the end of the day, you need to find the style that works for you, but just know that you don’t have to day trade or even come close to make money. Think about this: you could of shorted the EUR/USD many months ago and walked away and been ahead for a nice profit.

By the way, I don’t recommend ignoring your investments for months, just making a point here. You don’t have to be glued to the markets 24/7 if you don’t want to do so.

Lie Four: You must be ultra-smart to “beat the market”

This one makes me laugh. First of all, you don’t need to beat anything. It’s this idea of “beating” that kills currency traders (and those in other markets) all day long. This concept usually leads people to trying their luck with picking absolute tops and bottoms. Actually, I believe most of this concept comes from the stock market where people are skewed to looking topside only since shorting stocks has a negative connotation to it and can be difficult (rules, etc). Forex is different, so leave those thoughts behind.

It’s all a mirage. Just go with the market. You don’t need to be in at the bottom or ride it to the top to make money.

The world is full of people who are extremely intelligent, but broke. And it’s full of people who are not quite the brightest, but doing great.

That said, you do need to spend time learning some basics (see my Forex beginner’s reading list).

Case in point

In one of those books in my reading list there’s an interview with a guy who trades Forex on a yearly basis. He figures out one currency to trade and goes with it all year. He may add positions as the year goes on, but he doesn’t constantly change direction like most beginners who overtrade. Time and time again he averages a 20% return each year, which is fantastic. Some “forum players” will scoff at the return, but the market has a way of weeding out people who play risky games. Who cares what you did or will do over a short timeframe like a few years. What’s more important is what you’ll do over 10, 15, 20+ years. Consistency over the long run wins the marathon.

I bring up that story because it shows that you don’t need to day trade or be in front of the computer 14 hours a day. It shows you don’t need to be ultra smart and it also shows that you don’t need to analyze tons of chart items fast to profit.

One concept you’ll read about often is finding your own style. Some of us are better shooting for 50 pips a week, some of us are better off trading on an annual basis and select bunch can be successful over the long run day trading Forex. Point is, there’s no single right way. Find what works for you consistently and go for it. And never take on too much risk.