It’s a well-known fact that forex trading in SA boomed during Covid, as South Africans facing financial uncertainty sought new ways to make passive income.
Many of these, lacking knowledge of trading or financial markets, will have blown their trading accounts in record time.
“Our experience is that those who took the time to properly educate themselves in trading and financial markets fared better than those who didn’t,” says Isaac Izy, partner with online broking firm OctaFX. “This makes sense. As with any endeavour in life, the more knowledge you have, the better you will do.”
Some outlandish claims have been made when it comes to forex trading, with the promise of vast riches and all that comes with that – the ability to quit your job and earn a living from trading, travelling the world and having endless free time for more enjoyable pursuits.
“People see the pictures of yachts and luxury cars, and they believe this is what awaits them if they get into forex trading,” adds Izy. “This is not the reality. There are several myths we like to puncture in our education courses, which are available online, and these are free.”
Myth #1: Forex trading is a route to quick riches.
Some forex trading firms imply that you can become a profitable trader within a specific timeframe. This is simply not true.
The reality: Success in forex trading is a journey, not a destination, says Izy. “While some traders may achieve profitability relatively quickly, it typically requires a significant investment of time, effort, and continuous learning. The duration varies from person to person and depends on individual dedication and market conditions.”
Successful traders focus on a few trading instruments rather than trying to understand the entire market, and they get to understand the fundamental factors and dynamics driving prices in those markets.
Myth #2: Automated forex trading is one way of investing in the forex market.
With the help of special computer programmes (known as expert advisors or EAs), you do not need to analyse charts to find the perfect market structure; there is no need to open and close orders. Just choose the right expert advisor. Automated trading systems are programmed to do just that. In addition, almost all forex brokers offer trading signals that indicate when to enter and exit the market. It is claimed that these tools will make your trading easy and profitable.
The reality: While automated trading systems can assist in trading, they are not a guarantee of success. Effective trading involves understanding market dynamics, risk management, and strategy adaptation. Relying solely on automation often leads to losses, as markets are influenced by ever-changing factors.
Myth #3: You can make a lot of money fast. Faster than any other way you can imagine.
The reality: Forex trading can be profitable, but it is not a get-rich-quick scheme. It carries substantial risk, and those who rush into trading without a solid understanding often incur significant losses. Building wealth through trading takes time, practice, and discipline. “Understanding the risks of trading, such as leverage (where profits and losses are amplified), separates successful traders from unsuccessful traders,” says Izy.
You can prevent these risks by calculating trade volume correctly and managing the trade by placing stop-loss and take-profit [orders] on time.
Myth #4: You can get rich with little to no money.
This is one of the great marketing gimmicks used by forex trading firms: you can start with $250 and turn that into millions through the miracle of leverage. It’s a dangerous delusion, says Izy.
The reality: While it is possible to start trading with a small account, it’s essential to recognise that the size of your initial capital significantly affects your risk and potential for profit. Trading with very little capital can be high-risk, and substantial gains often require more substantial investments.
Myth #5: I have a holy-grail strategy that no one else knows, and you can buy it.
This is another gimmick that has fooled people out of millions of rands: those claiming to have developed secret trading strategies that they are willing to sell.
The reality: Truly successful trading strategies are built on sound principles and are not usually sold for a fee. Forex markets are highly competitive, and what works today may not work tomorrow due to changing market conditions. Relying solely on someone else’s strategy without understanding it is a losing strategy.
“In the forex industry, it’s crucial to approach promises of quick riches and effortless success with caution.
“Achieving profitability in forex trading demands education, practice, discipline, and a realistic understanding of the risks involved.
“Always be sceptical of claims that sound too good to be true and invest time in learning the intricacies of forex trading before expecting substantial returns,” says Izy.
OctaFX is a global and transparent broker licensed in South Africa, which offers zero fees and zero-commissions trading, and focuses on building successful trading habits through comprehensive education.
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