Myth # 1: Inverting the signals of a losing strategy must necessarily make it a winning one.

Any strategy that fails to exploit a real market inefficiency is effectively generating random signals.

Inverting a random signal generator will only create yet another random signal generator, which will, therefore, be equally ineffective.


Myth # 2: A simple strategy is more likely to be profitable than a more complex one.

To be fair, it depends on what is meant by ‘simple’. Many simple strategies can be coded as EAs, yet very few EAs are long-term profitable. The decisions made by many expert traders are context-specific, and take a large number of factors into account, and are therefore not necessarily ‘simple’.

To state the obvious, how simple or complex a strategy might be, is irrelevant. Profit is the ultimate goal.

Myth # 3: A good system should be able to be transplanted onto a different timeframe, and still remain profitable.

Price patterns on longer timeframes are qualitatively different from those on shorter ones. This is likely caused by factors like macroeconomics, cross-section of participants, greater collective averaging, and liquidity needed by heavyweight players, the relative effect of news announcements, session considerations, etc.

Also, the shorter the trading horizon, the more significant that costs and slippage become.


Myth # 4: Setting daily, weekly, or monthly profit targets is a good idea.

The trader who does this is effectively attempting to impose his own P/L expectation onto the market.

Traders who stop trading because a goal has been met may miss additional valid setups.

And conversely, if a trader falls behind his target, he must either set a more realistic target (proving that the original target was worthless); or he must overtrade or overleverage himself, in an attempt to reach his goal.

Myth # 5: Demo trading is pointless because it doesn’t test the trader’s emotions.

The whole point of demo trading is to test a strategy objectively, without the results being distorted by emotional decision making.

Trading an unproven strategy live can cause a lack of confidence in the strategy, especially if losses occur, and lead to emotionally-based trading decisions.

Obviously demo trading is futile if the broker’s test data is inaccurate; or if the trader loses motivation and fails to apply the strategy consistently.


Myth # 6: A holy grail exists.

Every method is prone to occasional losses.

In general, a return is impossible without some kind of risk. Perfection can never be achieved simply because, at any point, the market is a mix of anonymous participants whose agendas are unknown.

The best that any trader can hope for is an edge, and the discipline needed to execute it consistently.

If a claim being made about a system seems too good to be true, be wary of the egotist or the system seller. Systems with win rates, or even profit factors that are absurdly high, are almost certainly being propped up by money management that will eventually prove unsustainable.


Myth # 7: Forex is a scam.

It’s true that some brokers cheat their clients, and that many vendors sell BS signals, systems and indicators, and education that is effectively worthless.

It’s also true that heavyweight players attempt to manipulate prices in the hope of maximizing their profit.

However, beyond this, at best spot forex is merely a decentralized market that facilitates the trading of one currency for another. At worst, it is no more sinister than casinos or lotteries: you choose to speculate, and you are responsible for the decisions that you make.

Many people fall victim to their own greed, laziness, and ignorance. Successful trading is a highly nuanced art, and there is no substitute for knowledge and hands-on experience.

While educators can provide you with fresh ideas to test, ultimately the only person who can teach you to trade profitably is you.

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