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The myths of Forex trading

The Forex market, also known as the foreign exchange market or just FX, is a worldwide financial market where people buy and sell foreign currencies and benefit from discrepancies in exchange rates. The foreign exchange market is one of the largest financial markets in the world and it is estimated that USD 3.5 trillion is traded via this platform every day.

One of the first myths about Forex trading is the idea that only highly experienced, professional and wealthy investors can benefit from it. The reality is quite the opposite, with Forex being one of the most accessible markets in the world. One of the main advantages of Forex trading is that people can enter into the market with a relatively small amount of money. Furthermore, there are no brokers' feeds in Forex trading since brokers benefit from the bid-offer spread and not upfront trading commissions.

Another myth about Forex trading is that it's complex and too complicated for the average person to understand and benefit from. In reality, Forex is an over-the-counter (OTC) market, meaning it trades directly between two parties, unlike exchange trading, which uses a middle-man or "secondary" market to conduct trading (i.e. stock exchanges). Though it helps to know what affects the value of currencies and how to predict fluctuations in exchange rates, the skills needed to trade on the foreign exchange market are not out of reach to the everyday person. It is possible for anyone to learn the ins and outs of Forex and use their acquired knowledge to benefit from currency trading.

Finally, it is the misunderstanding of many that Forex trading is equivalent to luck-based gambling due to the unpredictable nature of foreign currencies. Though a person who isn't familiar with Forex may perceive the market this way, this evaluation of Forex trading is mistaken. In fact, the relative value of currencies and the fluctuations in exchange rates are not random. Those who know how to scrutinise changes in the market can predict the best times to buy and sell currencies based on their knowledge and expertise. The same cannot be said about slot machines, roulette and other types of luck-based gambling.

Thus, before engaging in Forex trading it can help to dispel the many rumours that surround this particular market. Though people may think that Forex is inaccessible, complicated and on par with gambling, the reality is very much the opposite.

The author of this article is a part of a digital blogging team who work with brands like Saxo Bank. The content contained in this article is for information purposes only and should not be used to make any financial decisions.