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The Truth About Currency Trading: Tax and Expectations

The Truth About Currency Trading: Tax and Expectations

Trading is a mystery to many people, and this is likely why so many myths and half-truths have grown up around it. For those who are thinking of getting started, these pieces of misinformation can be problematic, giving them a completely unrealistic view of what trading is really like. Let’s look at the biggest tales that are told about trading and what the truth behind them really is.

If You Want To Get Rich Quick, Trading Is Not The Way To Do It

One of the biggest confusions about trading is how quickly you can make money from it, and how much money you can make come to that. There is this idea that if you put a few pounds into a trade minutes later you’ll walk away with thousands. This is absolutely not the case, and the more people who understand that trading is a waiting game the better.

Experienced traders know that it is best to trade a little at a time, and only on trades that really work for you and your own specific set of rules; your trading plan in other words. You can make money from trading, and make a good amount too, but it will take time, and it will take patience. If you’re looking for a quick way to make some cash, trading isn’t right for you. For more information about building a trading plan, click here.

You Need To Be At Your Desk All Day

Sitting at a desk all day might be what you do for a day job, so you won’t necessarily want to keep doing it when you’re trading. Or you might have a job that means you are out and about, so you can’t take the time to sit and watch the trades as they go up and down. This can put people off as they just don’t want to be stuck in front of a screen, or they don’t have the time even if they do have the inclination.

Happily, though, this isn’t the truth of it. You really don’t have to be watching your trades all day along is order to be successful. In fact, it’s often best to ‘set and forget’ so that you don’t stop a trade too early or leap into something on impulse.

What is also true is that you don’t have to trade every day. You don’t have to trade every week. You only trade if everything aligns for you. This can be hard to get your head around at first because surely if you’re not trading you’re not making money (true), but remember: trading badly just because you think you should is just as bad, and not only will you not be making any money, you’ll be losing what money you had.

Every Day Is A Pay Day

It would be fantastic if you could make money every day when you’re trading, but it’s not what really happens. If you do try to make it happen and force the trades, you’re much more likely to lose everything than make anything.

It is vitally important to understand your trading plan and only trade when your strategy tells you it makes sense to do so. Otherwise, you’re just trading for the sake of it, and the chances of getting any kind of return are slim.

Tax Advantages

In some countries such as the United Kingdom, private investors can trade under the wrapper of “spread betting” which means that they can enjoy winning trades tax-free. This applies to currency trading, commodities trading and equities trading. However, they cannot offset any losses against tax. This is only recommended if you are consistently profitable. For more information, click here.

You Won’t Make Money Trading The Higher Timeframe

The higher timeframes require must less set up work, and this has, over time, morphed into the incorrect idea that they are therefore not as profitable as shorter timeframes.

Where this idea has come from we just don’t know, but we can categorically state that it is not right. If the trade is of a good quality and matches with your strategy, then you will make money. If not, you won’t. Whether it is a high or low timeframe really doesn’t come into it.

There are some definite advantages to trading the higher timeframes, however. Firstly, these trades are much more stable, so they are less likely to be affected by outside influences, unlike the shorter timeframes. Plus, the stop loss can be much further from the entry price, giving us more chance of securing success. Of course, to do this we need to be more patient than ever; that’s how the higher timeframes work, they just take longer to complete.

Brokers Are Crooks

Hollywood has a lot to answer for, but so does humanity’s innate issue with trust. We are told that people are out to steal from us, to take what is rightfully ours, and that we need to prevent this as much as possible by protecting ourselves and our assets.

When it comes to brokers, it is no wonder that some people wrongly believe that they will be ripped off, and therefore don’t use one at all.

The truth is that, although there are unscrupulous brokers out there, just as there are unscrupulous roofers and mechanics and dog sitters and anything else you might like to name, the majority of them are good at what they do, and are there to help you. Brokers are in business, and that means they need to retain customers, they need to keep people happy, and if they are swindling people left, right, and centre, that is not going to happen. They will soon get found out and rather than making money – rather a nice amount in many cases – legitimately, they will lose everything.

It just doesn’t make any sense for a broker to cheat anyone.

Do your research and find a reputable broker who you can trust and you’ll find that life – the trading part of it at least – becomes much easier.

You Can’t Trade Unless You Know The Fundamentals

Knowing lots and lots about the fundamentals off the charts and the news for trading is fine if that’s something you want to be involved in, but not having (or being particularly interested in) this information won’t affect your trading. It’s the charts themselves that tell us what to do and how to do it, not anything going on in the background, so it’s the charts themselves that you should be concentrating on.

Trading on what you see is what is most important. What you think is something else entirely, and just because you have a lot of information about something, that doesn’t make it right at that precise moment. Learn to trust the charts rather than anything else you might be presented with.

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