As the world’s most liquid financial market, forex trading attracts a steady stream of novice traders on a daily basis. Naturally, newbies come with a lot of questions, some relevant to their trading success and others not so much. Unfortunately, many new traders get distracted by the marketing hype and end up focusing on the wrong things. If you’re new to forex trading and are unsure whether you’re asking the “wrong” questions, this list should enlighten you. Here are seven of the most popular questions pondered by forex newbies.
- How long until I become profitable?
An equally nonsensical variation of this question is: What kind of monthly return can I expect? How does one even go about answering these sorts of questions? The reality is, nobody knows whether you will become profitable in the first place, let alone can give you a definite timeframe for success. The better question is: What are the skills I need to develop to become a successful trader? That’s a question worth pondering.
- What’s the best indicator?
Newbs who ask this question are really searching for one thing: the Holy Grail of forex trading. In short, it doesn’t exist. Every forex indicator comes with a set of strengths and weaknesses. Successful traders have utilized a wide array of indicators to make money. It all comes down to understanding how the indicator is used and when to apply it. That comes with education and experience. In general, moving averages, strength indicators, volatility indicators and oscillators tend to be the most popular forex indicators.[1]
- What’s the best robot?
There are so many things wrong with this question; the fact that it gets asked so often by new traders is truly frightening. For the record, forex robots/Expert Advisors are automated trading programs that use technical signals and algorithms to execute trades on behalf of the trader. Unfortunately, nobody really knows how these things are programmed. What we do know is they can’t compensate for dynamic market-changing conditions.[2] The marketing hype guaranteeing huge returns certainly won’t tell you that.
- What’s the best ECN broker?
ECN (electronic communications network) brokers have certainly become fetishized in the forex trading world. Technically, an ECN broker provides traders with direct access to other participants, which means the broker cannot trade against the client. Although this was meant to replace human dealing desks with lightning fast “electronic execution,” this is rarely the case. ECN brokers make use of a liquidity bridge that allows them to choose which trades they send to market and which trades they execute internally. If you’re new to forex trading, focus less on buzzwords like “ECN” and more on a broker’s reputation, history of paying out clients and longevity in the market.
- What’s the best bonus program?
Growing competition in the forex trading world means more brokers are offering lucrative bonus programs to attract new clients. While bonus programs are certainly advantageous, they shouldn’t be what sells you on a broker. Things like fixed spreads, trading tools, trading products, account types and customer service are far more important. The size of the bonus should be the icing on the cake in choosing a broker and nothing more.
- What’s the best time frame?
The best time frame for trading currencies is the one that fits your own schedule. Forex traders have enjoyed great success trading in all time frames, from daily charts down to tick charts.[3] If you’re a forex newb, the better question to ask is: How much time can I reasonably and effectively devote to trading?
- “Hey bro, what do you think will happen with EURUSD today?”
Anyone who’s worked live chat at a forex broker has received this question. Traders aren’t shy in asking complete strangers about specific trades. It’s one thing to have a network of forex traders to share your strategies with, but it’s another thing altogether to search for confirmation bias or treat forex trading as a coin flip. Trading the financial markets is very serious business, and your strategy should supersede the opinions of others.
Final Thoughts
Due to its growing popularity, forex trading is a rapidly expanding industry that’s in a constant state of evolution and change. Traders need to adopt proper perspective in order to avoid the marketing gimmicks and focus on the things that matter. Success in forex trading requires a clear and concerted strategy. It requires careful planning, education and perseverance. New traders who plan on sticking it out in the forex market must adopt a winning perspective. In that respect, there’s no substitute for hard work.
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[1] Rob Pasche. “3 Popular Questions New Forex Traders Ask.” Daily FX.
[2] Babypips.com. Forex Robots.
[3] Rob Pasche. “3 Popular Questions New Forex Traders Ask.” Daily FX.
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