To receive new articles instantly Subscribe to updates.
How many currency pairs you should trade
Written by: PaxForex analytics dept - Tuesday, 13 October 2015 0 comments
Forex trading is essentially the buying of one currency and the simultaneous selling of another. Therefore when trading currencies we will always see them quoted in pairs. When placing a trade we are speculating on which currency we believe will become stronger or weaker against the other with the goal of making a profit from the exchange rate movement. There are many complicated choices a forex trader makes while refining their strategy and approach. One of the most important decisions to make is what currencies and how many to follow and trade.
Is it better to focus just on one currency pair, or is it better to focus on as many instruments as possible? There is no simple answer to these questions, it all depends on each trader, but there are certain guidelines that you can take in consideration to help you feel more comfortable with your system which will help you trade with more discipline and at the very end, get consistent results.
Every trader differs with diverse mindset, psychological self-control, trading approach and overall understanding of forex market. Whether you choose to trade
one pair or several is entirely up to you. Do not try to imitate other traders you know – your trading style must be picked and chosen by you. Your decision has to be based on what, how and when you wish to trade.
A single pair strategy allows the trader to really hone their understanding of the movements of that pair and the economies that fuels it. It is much easier to follow and attempt to understand the fundamental factors of a single currency pair. Selecting a single currency, as opposed to a single pair, still requires a significant time and energy investment to understand the other half of the related currency pairs.
However, having one currency that you know better than any other is enticing but can leave you short-handed in a few scenarios. Instead, a better approach would be to have a handful of pairs that respond to different occurrences in the global financial market. The diversified approach will still narrow your scope while at the same time allowing you to take advantage of the lowest hanging fruit for trading. There is no right or wrong way to trade. All forex trading ways are unique, special and should be personalized according to your agenda.