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Myths

1)  The more complicated the trading system the better chance you have at succeeding.

Just the opposite. The simplest solution is often the most effective. Any time you add another item or variable you introduce another point of failure. Keep Occam in mind when developing a trading strategy.

2)  The more I learn the more I earn.

Learning is never a bad thing... however... there's no such thing as a PHD in trading. Once you developed a system that works stick to it. Read and learn for the sake of personal gain. The Holy Grail of trading doesn't exist so you can stop searching for it.

3)  Mathematicians and people with science acumen make better traders.

Do I have a great example of this flawed logic. Long Term Capital. Trading is as much about emotion as it is about logic. Emotion can't be quantified. If this statement had any validity there would be a lot of MIT graduates on the Forbes list.

4)  You win more often by listening to analysts comments.

There are some very good analysts in the Forex world. However NONE of them know where the market is going. Trade based on a trading plan that you've tested and are comfortable with. If you find your trading decisions are being altered by reading analysts comments then stop reading them.

5)  Trading is exciting.

Only in the movies. Sitting for hours watching charts and reading economic reports -  I can hardly contain myself. If you experience the same rush from trading as you do from gambling then you are probably gambling.

6)  Great traders are born with an innate trading skill.

This sounds absurd but there are a lot of people who truly believe certain people are born traders. The last time I checked geneticists have yet to uncover the enigmatic trading gene.  This nonsense undermines the hard work successful traders put in to winning.

7)  After each loss I double up on the next trade. After losing 3 in a row my odds of losing on the next trade are minimal.

Nope. Doesn't work that way. If you flip a coin 100 times the 101 flip is still 50/50. Trading a small percentage of your account on each trade is the only way to survive your systems drawdown. Don't fall prey to the gambler's fallacy.

9)  All Day traders lose money.

You will see this one everywhere. Price action is the short term is unpredictable. Studies have proven it doesn't work. Spreads make it impossible to win. Support and resistance are meaningless. Day traders don't make as much. The list goes on and on. Yet every day a small percentage of traders beat the market. If one person can be successful at day trading then so can two. Don't let others project their inadequacies on you. 

10)  Stops tighter than 40 pips will result in failure.    

Your stop should be based on your system. Be cautious of anyone issuing absolutes - especially in the trading world. The time frame you are trading should determine your stop. Longer term traders will naturally have wider stops.

11)  Price action in the short term is random.

Who defines short term? If you have any evidence that price is random on any time frame please forward it to me. The information needs to be quantifiable and longitudinal. It's important to point out that we don't have empirical evidence to support our claim either - however - if you look at price action on a 5 sec time frame or a 4 hour time frame similar patterns emerge. If one pattern can be seen on a very short time frame then by definition random can no longer apply.

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Note: The Foreign Exchange market is the largest financial market in the world with an average daily turnover of 2 trillion dollars. It is thirty times larger than the combined volume of all US equity markets.

Disclaimer: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors.  Prior to trading any instrument you should carefully consider your level of experience and risk appetite. Do NOT trade based on recommendations from this site. We show you how to think for yourself. If you lose money be man or woman enough to accept responsibility for your own actions   

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