2Bull Forex Blog

The forex myths below are believed by 95% of forex traders and that’s why they lose - if you want to win then avoid these forex myths.

1. You need to predict to win

No you don’t. If you try to predict forex movements you’re really hoping and guessing and you don’t get rewarded for that in forex trading. You need to act on confirmation and trade the reality of a turn not just hope.

2. Markets move to a scientific theory

No they don’t. This myth is perpetrated by vendors selling systems based upon Gann Fibonacci and Elliot. Of course if markets did move to a scientific law, we would all know the price in advance and there would be no market! Common sense really.

3. The More Knowledge I have the better

Not true. You need the right knowledge and even that is not going to help unless you can apply your forex trading system with discipline.

In forex trading you don’t get rewarded for effort, you get rewarded for being right - in the execution of your trading signal. That can take 10 minutes or 10 hours but effort does not equate to success.

4. Discipline is easy

If you think following a currency trading system is easy you have never traded forex - it’s hard, even for experienced pros. In fact, the only way you will ever do it is - if you understand your system how and why it works and have confidence.

This means not just following a system blindly - but understanding why it will lead you to currency trading success, when you hit a string of losses.

5. The more complicated my strategy the better

After all 10 indicators are better than 3 - Not true. It’s a proven fact that simple systems work best, as there are fewer elements to break.

6. Buy low sell high is a great way to make money

If you believe that then you will miss the best trends that offer the best odds.

Why?

Because most major trends start and accelerate from new market lows or highs and you need to trade these breakouts.

7. Money management is easy all I do is place a stop

Placing a stop is not money management! You need to see money management in terms of risk to the overall account. Money management is critical to success yet most forex traders do it as an after thought.

8. I need to earn from losses

Well if you have a forex trading system, you are going to lose at some point. If the logic is soundly based you learn nothing - just take it on the chin.

Once you have a trading system you’re happy with you, don’t need any more education you simply trade it.

9. Experts know best I will follow them

Not in forex trading. We have great newswires but there just stories reflecting the greed and fear of the majority. Will Rogers once said:

“I only believe what I read in the papers”

He was joking of course - but many traders read a story and think its gospel and forget markets always rally when the news is most bearish and fall when it’s most bullish.

If the news helped traders a lot more would win and 95% don’t they lose.

10. Day trading is a great way to make money

Really? Then why do you never see a forex day trading system with real time track record?

Because it doesn’t work.

All short term volatility is random and forex traders get wiped out.

Again it’s a good story and so is Harry Potter - but I don’t believe I can fly!

Avoid day trading which is perpetrated by vendors appealing to greed and naivety.

ONE FINAL POINT!

If you want to win you need to avoid the above forex myths and get a trading edge. A trading edge is something that helps you win and enter the elite 5% who make big gains and enjoy currency trading success.

If you don’t know what yours is don’t trade and all the above myths will NOT Give you an edge - PERIOD.

Can you really make money by following a computerized forex trading system? Well a while ago I bought one and knew the vendor and knew one of his clients made $1.4 million with it REAL MONEY in just a few years. Now that sounds great - but there is a catch with computerized trading systems …

The catch is executing them - let me explain this in more detail.

I bought the system and it consisted of one parameter and that was it. The logic was easy to understand and you could see why it worked longer term - but do you know what?

I couldn’t execute the system in line with the signals and this is a common problem.

My reason was it was at the start of my trading career and I was trading money I couldn’t really afford to lose - I put my own input in ruined the system and got my reward - a huge loss.

Serves you right you may say and yes it did - but there are other related problems why traders lose.

Most of the Systems Sold Are Junk

I know now with my experience of trading 99% are junk and will never re produce the gains they make on track records presented - Why?

Well at least on the one I traded had a real time track record - but most sold today, are by marketing companies who simulate in hindsight a track record - well we can all do that knowing the closing prices!

They are normally based upon rules that are not revealed, or rules that have been curve fitted (if you don’t know what curve fitting is look up my other articles) and the trader who thinks he will get rich for a few hundred bucks or so gets wiped out - lesson learned.

To trade a system, you really need to look for a real time track record but even with this, you face a problem:

Drawdown

Drawdown is the problem with any system. Those losses on paper, don’t hurt like they do when you lose real time.

If you are following a forex trading system always assume the worst drawdown is ahead (and very few good ones drawdown by less than 30%) so, when studying the track record, don’t look at average drawdown, look at worst peak to valley drawdown in amount and period of recovery and accept that’s going to happen - that way things can only get better.

Following the markets

If you follow a purely mechanical trading system don’t watch the news!

Whilst we know its wrong and reflects the herd, when your trading system opposes those sensible news stories, you have a problem of discipline and believe me, those news stories can frighten the hell out of you and make you feel dumb for following even the best systems.

Pay to much attention and you are tempted to interfere with the system and that means the end of your system.

Following mechanical trading systems is hard and you must be disciplined at all times.

You need to ignore the news, accept drawdown cheerfully and understand the system logic and ideally to instil confidence, have a real time track record, to know the system has at least worked and is based upon sound logic.

If you can do the above, then mechanical systems are a great way to make money.

If you cant, then you should devise your own with as much human input as necessary, to make you feel comfortable.

The system I traded on and lost, won for many people and its logic is timeless - but I made no money with it which taught me one of the biggest lessons of my Forex trading career.

The Fibonacci number sequence and Fibonacci retracements are a tool used by forex traders to help enter and exit trading signals for better market timing and bigger overall profits. Here you will find all you need to know about using Fibonacci numbers and retracements for bigger profits.

Leonardo Fibonacci was a famous Italian mathematician, who lived in the 13th century Italy The Fibonacci sequence was first printed in the Liber Abaci, in 1202.

The Book introduced Hindu-Arabic numerals to European mathematics to replace Roman numerals but the number sequence was actually devised to solve this problem:

How many pairs of rabbits would be produced from a single pair, if each month each pair produces a further pair, which, from the second month, started producing more rabbits again and so on.

Here is the sequence that solved the problem.

Each number is the sum of the two preceding numbers; 1, 1, 2, 3, 5, 8, 13…

When applied to currency trading it’s the ratios derived from the sequence, that are used on forex charts and they are 236, .50, .382, .618, etc.

These Fibonacci retracements can be used to spot support in the market and devotees of the sequence use them to enter trading signals.

The two Fibonacci percentage retracement levels which are considered the most critical are: 38.2% and 62.8%.

Other significant ones are: 75%, 50%, and 33%.

So by buying these retracements you can make bigger profits as devotees of Fibonacci claim that they work to a scientific law - But can you make money doing this?

Of course you can’t, its one of the most ridiculous theories to be used in forex ever and simply doesn’t work.

This is not to in anyway deride the work of Leonardo Fibonacci he was a talented man a brilliant mathematician, but the levels have nothing to do with trading!

Were Leonardo Fibonacci alive today, would probably be bemused at the way his theory has been applied to an area it was NEVER supposed to be applied to.

The myth that the Fibonacci number sequence can be applied to trading has been sold by vendors who see a good story and sell it.

It’s mystical and appeals to the far out investment crowd - the losers and the dreamers.

These vendors sell forex trading systems based upon it and of course they don’t work. These vendors claim the sequence is part of natural law, which says that human psychology is constant and therefore repeats itself in line with the numbers.

Human nature is not predictable and NOT scientific in anyway, humans don’t conform to natural law their beings that are emotional and unpredictable.

Try them and see if they work.

They do sometimes - but pick any retracement level you like and that works sometimes - but that’s not scientific! To be scientific by definition it must work ALL the time.

If it’s scientific it should work ALL the time! This is common sense and we all know this from school but still huge numbers of forex traders believe they work and pay for their folly with losses

The number sequence comes up a lot in the theories of Elliot Wave and Gann which are other scientific theories which claim to predict the future and can make you rich .

How accurate are they?

As accurate as your horoscope.

As we have said - If it’s a scientific theory should work ALL the time, otherwise it’s NOT a scientific theory by definition.

If they did then vendors who sell them wouldn’t need to for a few hundred bucks - they could keep quite and make a fortune without you having to give them money..

Trading is a game of odds - not certainties and if you don’t understand this fact, you will lose - forget science, you can’t use it but you can trade the odds and win.

Trusting your forex trading strategy to a theory based upon the copulation of rabbits, is not a way to make money, so leave the Fibonacci number sequence to the far out investment crowd and concentrate on working on a forex education that’s based upon logic not mysticism.