In the exciting and often cutthroat world of investments and trading, things are not always what they appear to be. Markets that seem promising today can go belly up tomorrow–it shouldn’t take another stock market crash to remind us what can happen to our money if we’re not careful. One of the latest crazes in the trading world is Forex: the market for buying and selling foreign currencies. Lots of people are getting into this field, but many of them don’t fully understand it, so there is a lot of misinformation going around. Before getting into Forex, there are a few myths you’ll need to debunk first.
1. There is No Risk
No investment in history has been risk free. Any time there is a possibility of gaining money from an investment, there is the possibility of losing. Everything that has a front has a back. Forex is actually one of the more high-risk markets out there, and should not be taken lightly. Always understand the risks before entering into any investment deal.
2. Easy Money
Forex trading is simple in theory. Buy foreign currency at low value, sell it at high value. In practice, however, it isn’t always so clear cut. Nothing about Forex is easy, and to be able to profit on the market requires the ability to predict which currencies are going to rise and fall in value. To be able to do this requires a deep knowledge of global economics, politics, and current affairs, or at least a reliable source of information on these topics. Some believe that they can make valid predictions based on past trends in currency value, but these predictions often fail.
3. Forex is Just Like the Stock Market
Many investors believe that their experience in the stock market will carry them along in Forex trading. After all, how different can the two be? Well first of all, there is limited available information about currencies as opposed to commercial stocks, and your usual trading strategies may not work in this new environment. Also, the Forex market requires constant vigilance and hard work because this market is open 24 hours a day.
4. Buy on Margin for Greater Profits
Buying on margin is essentially the act of borrowing money from a broker to invest more than you can afford. This does have the potential to go very well for you, because you have the chance to make significantly more money. However, in the cases where you lose out, you’ve not only lost your own money but now find yourself in serious debt to the broker. Amateurs should stay away from margin trading.
5. This is Just a Scam
The myths about Forex lead some to believe that it is nothing more than a scam. Rest assured that while much of the information is misleading, Forex is a legitimate market where people do make lots of money. If you are interested in breaking into this market, Forex trading companies like Sunbird and other companies are the best places to get help to start trading from your home with advanced software. However, be careful, and educate yourself about the market, but don’t simply dismiss it–there’s a lot of money to be made here.