5 Common misconceptions about the South African Forex Trading Market

Posted on 27th Feb 2017

There are several misconceptions regarding the Forex Trading Market that are rooted in misinformation, insufficient knowledge and cliches. These are also applicable in the context of the South African currency trading market. South African Forex traders too like in any other part of the world are as likely to be easily susceptible to misleading notions, especially if and when they have faced a series of consecutive losses. Thus it is important to be able to distinguish fact from fiction in order to be able to succeed in the market and avoid needless frustration. Here are few common misinterpretations:

1.  You can become a millionaire in no time: This is a complete fallacy. Forex trading has gained in popularity over the span of a decade with the opening up of the retail market in currency trading. Many people participate in FX trading thinking that they can earn loads of money quickly and with effortless ease. But as for other things in life here too only hard work pays. Of course today anyone can trade at their fingertips no matter where they are. But to be a consistently successful trader requires years of practice, a meticulous trading strategy, knowledge of the markets, discipline and patience.
2.  The herd mentality works: A perfect forex trading strategy simply does not exist. One should adopt a unique strategy that works only for them i.e. suits their abilities, account balance and risk constraints. If one blindly copies another's trading approach one is most likely to accrue losses as it may not be compatible with their personality, trading style or requirements.
3.  You can be correct always: It is a truth universally acknowledged that losses are inevitable in forex trading. So hankering after a foolproof method will either leave the traders on the sidelines or make them enter the markets with an overenthusiastic plan that will fail miserably in adapting to the changing market scenario. However, accepting that losses are unavoidable and adopting a strategy that gives a slight advantage is enough to stay afloat and generate positive returns.
4.  Capitalizing on forex news is quite easy: Predicting any currency movements, following any breaking news or big announcement is easier said than done. News events can be practically impossible to trade in instantaneously. What the charts don't show is that there is hardly any liquidity for movements soon after an announcement. Although traders can enter a position prior to an announcement it requires careful analysis of the statistics in order to determine how it is likely to impact the market.
5.  Forex market has insider trading: The Forex market is so vast that it is beyond anyone's capacity to be able to rig or manipulate it. There are people participating in forex trading every day and in every corner of the globe contributing to its trading volume being the maximum with a throughput constituting of US$ 5.3 trillion daily. Even if a central bank or any other entity tries to control it that will be only for a few minutes. After that prices will be back to normal and standard trading will resume.