Trading Illusions.
Forex trading, more than anywhere else, is fraught with a host of illusions, which often become the main reason for losing
a deposit or incurring large losses.
Many traders have a certain perception of forex, as if certain rules and patterns apply.
While this is true to some extent, one should never blindly trust the laws of the market and technical analysis; one should always be prepared for trouble and hedge one's trades.
The main illusions of trading include:
• Ease of making money - at first glance, it seems that making money is as easy as possible, but this is just a trap for an inexperienced trader.
• After a breakout, the price will go further - but false breakouts also happen, when, having broken through an important level, the trend, having passed several points (tens of points), makes a reversal and starts moving in the opposite direction.
In this case, transactions with pending orders are especially dangerous, the trader may not be able to control the situation during a false breakout, which will lead to significant losses. This is why it is so important to use stop loss even when placing pending orders.
• The price has a bottom and a ceiling - how many times have you encountered a situation when you think that the price has reached the limit and started moving in the opposite direction, but as a result, the expected reversal turns out to be just a correction and, at best, the stop loss is triggered.
• Technical analysis can be learned in theory - you can study only the basic methods and techniques, but without practical training, you are unlikely to be able to make a profit. Only practical trading provides the skills necessary for making money.
• You can make money on Forex with high leverage - yes, you can make several successful trades with leverage of 1:500, or even several dozen, but the result is always predictable - a deposit wiped out. The only exception might be a deposit overrun , and even that isn't always successful.
Most professionals trade with a leverage of no more than 1:10, but to make money in this case, you need a solid sum of several tens of thousands of dollars.
• Profitable advisors exist - I have yet to meet someone whose advisor traded for more than six months. It usually ends with a deposit wiped out. A less risky alternative to advisors at the moment is Forex Copy or investing in diversified management systems .
• News always influences trends – there are numerous examples where even important news fails to reverse an existing trend, for which reason market entry occurs only after receiving definitive confirmation signals.
If desired, one could name a dozen more illusions related to market analysis or the technical side of trading, but the main thing in Forex trading is to always be prepared for change and avoid large losses.
