If you’re thinking about getting started in forex trading, you’ll know that there’s an awful lot to consider. You need to do your research into the markets, figure out your budget, set your goals and create your strategy.
Recent data from the Australian Foreign Exchange Committee reveals the daily average turnover of AUD/USD trades exceeded $60 billion as of October 2021 – and that’s just one currency pair. With such significant amounts changing hands, it’s clear to see that there are opportunities to be had by venturing into the FX market.
But there are also plenty of misconceptions, which could dissuade you from becoming a forex trader. Here, we try to debunk some of those myths.
You need a finance degree
What you need is an understanding of how the markets work and what influences the movement of currency values. This could be geopolitical issues, the cost of raw materials for import and export, supply/demand and any number of other external factors. You need a basic grasp of these elements but not an in-depth knowledge of every economic principle.
You need lots of money to start with
Of course, the more capital you have to play with, the greater your margin for error – while it also enables you to take a slightly riskier approach. But having vast resources isn’t a pre-requisite. With shrewd, sensible trades you can steadily grow your money and adapt your strategy as you do so.
You have to watch your screens 24/7
Due to the opening hours of FX markets across various time zones, you can trade almost every hour of the day, but it’s certainly not something you have to do to become a success. You can even approach forex trading as a side hustle to your full-time job and keep an eye on the markets via an app on your phone while on the move.
Trading is like gambling
Those unfamiliar with FX trading see it as something akin to having a punt on a roulette wheel, where everything is left to chance. But the reality is that you make rational, informed decisions on the trades you execute, based on a wealth of research and an understanding of the factors that can affect the value of a currency pair.
The forex market is rigged
There have been concerns that some traders manipulate the markets by triggering a rush of trades around the time of the fix – a short window in which the average exchange rate in currency trades is used to set the benchmark for the industry. It was believed that some were executing more deals than usual within this period in order to skew the numbers, but the window has since been extended to make it harder to influence the market.