First, let me start of with the term ‘investment’ in Forex. It always irritates me (slightly) when people refer to Forex as an investment. And it irritates me more when they complain that they cant get a profit out of their investment. People, let me tell u this now. Forex is NOT an investment. Let me explain.
In order for something to be an INVESTMENT, it has to meet a few criterias in my opinion –
1) it has to be profitable mostly
2) maximize safe profits
3) little risk, little sentiment
There are a few investment opportunities that meet those criterias, such as your typical ETF, IPO and hell, even the investments in your local bank.
Now, does Forex meet those 3 criterias? NO-
1) it has to be profitable mostly= EVERYONE knows 95% of forex traders fail
2) maximize safe profits= no brainer, there’s only safe profits in Forex if you practice safe and proper Risk management and MM
3) Little risk, little sentiment = I think we can all agree that Forex contradicts those 4 words.
Forex is NOT an investment, its also NOT gambling. IMO, Forex is all about SPECULATION.
People have to understand these points –
Investment = Majorly safe
Gambling = knowing the odds are stacked against you and taking a risk
SPECULATION = (taken from wiki) speculation is the practice of engaging in risky financial transactions in an attempt to profit from short term fluctuations in the market value of a tradable financial instrument
You SPECULATE the markets ANALYZING, PRACTICING PROPER MM, BEING KNOWLEDGEABLE, TAKING SMART AND CALCULATED RISKS.
You wanna know why 95% of Forex traders fail? Because (aside from emotions and lack of a proper plan) they are viewing Forex as a foolproof investment.
‘Forex is so simple, it can either be an uptrend or downtrend, all i hvae to do is be a little bit knowledgeable and ill be able to predict the markets, that brings it from 50-50 to 70-30’ Well, good luck to you if that’s your mindset.
Now, myth 2, in order to consistently profit from Forex, you MUST have a profit goal.
I’m sure you guys have seen pictures and plans of people starting out with a ‘plan’ of maybe $100 capital, and they’ll include their daily profit expected goal, how much it accounts to weekly and monthly, etc and how their lot sizes grow based on their ever growing capital.
Let me tell you personally from my own experience.
IT. DOES. NOT. WORK.
Even if one is to plan a profit goal safely (lets say hoping to profit 5 dollars everyday with 200 capital), this whole concept is based on the subconscious idea of NOT HAVING A LOSING TRADE. That’s why a profit goal will not work.
There are good days, there are bad days. What a profit goal makes you do is hit the daily quota/goal and stop for the day. It doesn’t take into account that there are days where you lose trades. What happens if u close a losing trade and u still need to hit your quota ? Revenge trading. What happens when u revenge trade? Your emotions amplify, you get nervous when it goes to loss and u lose even more $. A profit plan is so dangerous because it forces you to hit your weekly/monthly goals. and if its not close, you open larger lot size and risk bigger losses.
For me, I’m happy as long as i see my capital grow weekly or monthly.