After almost thirteen years of activity in the global financial markets, I still to this day believe that currency trading is by far one of the very best entry points into the world of trading for almost anyone who is interested. It is so versatile that it also lends itself to the more experienced investors and market speculators. This is a huge market which must be considered for any active portfolio. However, with all good things there are also a few other aspects that must be taken into account before jumping straight in, most of which come from the lack of quality information available to us and incorrect guidance thrown in for good measure. Let’s clear a couple up trading myths right away.

Trading Myth #1 – Forex Markets Are Fair

One of the single worst trading myths that I hear touted around on various broker and trading news websites is how FX has the huge advantage of being a “fair” market, more so than others. So what does this actually mean? Typically, this is usually referenced with regard to the economic news schedules which impact currency prices on a daily basis. I have heard the statement that there is very little or nowhere near any insider trading in FX because the market is too big and due to the fact that all economic news is released publicly at the same time. This illusion alone encourages newer traders to place orders around the major news events, like Non-Farm Payrolls, while attempting to jump on board a major market move for a quick profit.

Without doubt, this is probably one of the most reckless things a trader can do and makes the art of market speculation into nothing really more than a low odds gamble. Major banks, institutions and professional traders all know the dangers of trying to predict the news outcomes. They instead allow price to come to them. Sure, now and then you could take a breakout play off the back of a news statement and make some quick easy cash, but trying to do it over and over again probably won’t pan out. In the long run, trading the news is nothing like having a detailed and sophisticated trading plan to work from which stacks the odds in your favor for the long haul. The big players know how novices react to news, because they are wrongly educated to do so, and then capitalize on the fact by pretty much doing the opposite. This is a zero-sum game after all.

How many times have you seen good data releases push a currency pair higher in a very short space of time, only to then witness it practically stop, reverse down and continue to fall for the rest of the day? This can also happen vice-versa, and it is more common to see initial knee-jerk moves in price followed by complete reversals in sentiment which have little if anything to do with the actual news release itself. A professional FX trader can take advantage of these events though, when they truly begin to understand how prices in the markets really behave. Here at Online Trading Academy we teach our students the rules of price in the real world, highlighting the simple fact that markets only go up and down because of imbalances in Supply and Demand created by institutional buying and selling. The professional trader simply knows how to look through the noise of the media and technical chart patterns to see where the biggest market players are entering into positions. Once you know what to look for you can simply trade with banks and not against them.

The biggest institutions will create major supply and demand imbalances with their buying and selling activity due to the size of positions they take and how they have to trade. Also, due to the global nature of the FX markets, these imbalances and trading opportunities can present themselves to the astute market speculator all around the clock as well.

Forex Trading Myth #2 – European Market Hours Provide the Best Opportunity

Another common trading myth about the currency world is that the very best trading setups only take place during the European market hours. Sure, this is one of the most liquid times of day buy it is not the only time to trade. It also does not mean that we have to be there in front of the screen to be able to trade either. Let’s be honest, if you live in Europe and have a full time job, you can’t suddenly take the mornings off to trade can you? If you are based in the USA, then you would have to get up in the middle of the night and that’s not really practical in the longer term either.

Rest assured my friends, while the European market hours do offer many solid trading opportunities, if you learn to read the charts objectively and find your levels to enter ahead of time, you can easily “set and forget” your trades and let them play out in the background, no matter the news or fundamentals surrounding the trade.

In a recent XLT session on August 7th, we did that exact thing on the NZDUSD, well ahead of the RBNZ Official Interest Rate decision a few days later on Aug 10th. Below you will see a screenshot of the NZDUSD as we are drawing in our level of Demand to buy the pair:

FOREX

Having set up our trade to buy at the institutional level, with a stop loss if wrong and a profit target at the previous highs, there is nothing more to do than let time pass and see what happens. A few days later, the cash rate was announced with a lowering of the rate from 2.25% to 2% which is typically bearish for a currency, although our strategy said it was a great time to buy. Here is the result over the next few days:

NZDUSD

As you can see, the market rallied nicely from our pre-determined level of demand, providing a decent risk to reward profile and all around the news, even though it was a set and forget opportunity.

I learned early in my trading career that attempting to follow news is not the way to go if you hope to achieve consistency in the financial markets. The news will typically trap you into doing something you shouldn’t be doing, rather than making the objective choice that is in line with how money is really made in any business. My advice is avoid these trading myths by: checking your charts, placing your orders and then living your life! See you next time.

Learn to Trade Now


The information provided is for informational purposes only. It does not constitute any form of advice or recommendation to buy or sell any securities or adopt any investment strategy mentioned. It is intended only to provide observations and views of the author(s) or hosts at the time of writing or presenting, both of which are subject to change at any time without prior notice. The information provided does not have regard to specific investment objectives, financial situation, or specific needs of any specific person who may read it. Investors should determine for themselves whether a particular service or product is suitable for their investment needs or should seek such professional advice for their particular situation. Please see our website for more information: https://bustamanteco.com/privacy-policy/

Editors’ Picks

EUR/USD treads water just above 1.0400 post-US data

EUR/USD treads water just above 1.0400 post-US data

Another sign of the good health of the US economy came in response to firm flash US Manufacturing and Services PMIs, which in turn reinforced further the already strong performance of the US Dollar, relegating EUR/USD to the 1.0400 neighbourhood on Friday.

EUR/USD News
GBP/USD remains depressed near 1.2520 on stronger Dollar

GBP/USD remains depressed near 1.2520 on stronger Dollar

Poor results from the UK docket kept the British pound on the back foot on Thursday, hovering around the low-1.2500s in a context of generalized weakness in the risk-linked galaxy vs. another outstanding day in the Greenback.

GBP/USD News
Japanese Yen drops to fresh daily low; USD/JPY approaches 155.00 ahead of US PMIs

Japanese Yen drops to fresh daily low; USD/JPY approaches 155.00 ahead of US PMIs

The Japanese Yen struggles to capitalize on stronger domestic inflation-inspired intraday uptick. The BoJ rate-hike uncertainty, the upbeat market mood and elevated US bond yields cap the JPY. The USD climbs to a fresh year-to-date high and offers additional support to the USD/JPY pair. 

USD/JPY News

Editors’ Picks

EUR/USD treads water just above 1.0400 post-US data

EUR/USD treads water just above 1.0400 post-US data

Another sign of the good health of the US economy came in response to firm flash US Manufacturing and Services PMIs, which in turn reinforced further the already strong performance of the US Dollar, relegating EUR/USD to the 1.0400 neighbourhood on Friday.

EUR/USD News
GBP/USD remains depressed near 1.2520 on stronger Dollar

GBP/USD remains depressed near 1.2520 on stronger Dollar

Poor results from the UK docket kept the British pound on the back foot on Thursday, hovering around the low-1.2500s in a context of generalized weakness in the risk-linked galaxy vs. another outstanding day in the Greenback.

GBP/USD News
Gold keeps the bid bias unchanged near $2,700

Gold keeps the bid bias unchanged near $2,700

Persistent safe haven demand continues to prop up the march north in Gold prices so far on Friday, hitting new two-week tops past the key $2,700 mark per troy ounce despite extra strength in the Greenback and mixed US yields.

Gold News
Geopolitics back on the radar

Geopolitics back on the radar

Rising tensions between Russia and Ukraine caused renewed unease in the markets this week. Putin signed an amendment to Russian nuclear doctrine, which allows Russia to use nuclear weapons for retaliating against strikes carried out with conventional weapons.

Read more
Eurozone PMI sounds the alarm about growth once more

Eurozone PMI sounds the alarm about growth once more

The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.

Read more

RECOMMENDED LESSONS

7 Ways to Avoid Forex Scams

The forex industry is recently seeing more and more scams. Here are 7 ways to avoid losing your money in such scams: Forex scams are becoming frequent. Michael Greenberg reports on luxurious expenses, including a submarine bought from the money taken from forex traders. Here’s another report of a forex fraud. So, how can we avoid falling in such forex scams?

What Are the 10 Fatal Mistakes Traders Make

Trading is exciting. Trading is hard. Trading is extremely hard. Some say that it takes more than 10,000 hours to master. Others believe that trading is the way to quick riches. They might be both wrong. What is important to know that no matter how experienced you are, mistakes will be part of the trading process.

Best Forex Brokers with Low Spreads

Best Forex Brokers with Low Spreads

VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.

Read More

Strategy

Money Management

Psychology