When trading forex pairs, it’s essential to know your limitations.
There are over 100 currency pairs on the forex market, and choosing which ones are right for you can be difficult.
While there are certainly some great opportunities in all those 100+ pairs, trading too many at once can be detrimental. You may find yourself in a trade that doesn’t work out because you don’t have the right tools or experience needed to make it happen.
You should also remember that trading more than one pair at a time is often too much for new traders! Even experienced traders have their own limits, and if they start adding more pairs, they won’t be able to focus on any particular strategy or indicator setup.
What is the optimal number of forex pairs to trade?
Forex trading is a lot like dating. There’s no one-size-fits-all approach; you can’t just pick one person out of the bunch and be done with it!
It would be best if you took a little time to get to know all of your options. If you’re trying to decide between two dates at the same restaurant, you might ask around friends or go on Yelp to see if anyone else has been there recently. You’ll want to do something similar regarding forex trading: test out different currency pairs until you find one that works for you.
The first step is simply identifying what kind of trader you are and what type of trader you want to be. If you’re an aggressive day trader who likes fast returns and doesn’t mind taking risks, then focus on those markets only—you don’t need to worry about getting into any other ones if they aren’t working for you. If this sounds like too much work for someone who isn’t yet ready for such a commitment, take things slow—start by looking at one pair each week or month, then build up from there.
It’s essential to have a strategy for trading forex; the number of currency pairs you trade depends on your system. One common method is to focus on one at a time. If that sounds too little for you, you could also choose to trade a basket of 5-10 currencies instead. This way, you can get exposure to a wider range of currencies without having to watch one all day!
If you want to build an average daily profit (ADP), then it might be better to focus on fewer pairs so that each one has more market exposure and, thus, more potential for making money. Suppose you’re looking for consistent profits instead. In that case, it may be better for you to take advantage of multiple pairs at once—especially if those pairs are highly correlated with each other (for example, closely tied currencies).
The benefits of trading multiple forex pairs
Trading multiple forex pairs is a great way to diversify your portfolio. It’s also a great way to improve your trading skills and become more profitable.
You can find multiple forex pairs with different timeframes and different strategies. For example, you can trade the EUR/USD pair and the GBP/USD pair, the AUD/USD pair and the USD/JPY pair, etc.
There are many benefits of trading multiple forex pairs:
- You can increase your profits by using different strategies. For example, when trading USD/JPY, you can use long positions on 1-hour charts to profit from falling prices in this pair while using short positions on 3-hour charts to benefit from rising prices in this pair
- You can improve your risk management skills by using different strategies
- You can learn how to manage your money when trading with various resources (forex brokers).
- You will have more chances to win because there are many opportunities for winning trades on different instruments at one time
The risks of trading multiple forex pairs
When you start trading, it’s a good idea to scale back on the number of pairs you trade. The average rookie trader begins with five or six pairs but no more than 10.
When you’re just starting out, getting caught up in the thrill of trading is easy. You see a pair of currency pairs and think, “I can make money with all this!” But that’s not how it works.
If you’ve never traded before, start by learning some fundamentals first. Then, build your strategy and stick to it. Don’t try to be all things to all people: if you do that, you’ll have so many trades open that you won’t be able to focus on one or two.
As for how many pairs should you trade? We’d suggest sticking with the bare minimum of 10 pairs at first (anything more than that is too many). After all, if something goes wrong with one trade or pair goes sideways for too long, it can throw off your entire strategy—and no one wants that!
Which forex pairs should I trade?
The most popular forex pairs are USD/JPY, USD/CHF, EUR/USD, and GBP/USD. These are the most liquid pairs in the market and thus offer better liquidity than others.
You can also consider trading other pairs such as AUD/USD, NZD/USD, and CAD/USD. These pairs have low spreads and offer greater liquidity than many different currency pairs. If you want to trade these pairs, you should look at trading platforms with an extensive range of forex pairs and margin rates to suit all types of traders.
Forex traders tend to get overwhelmed by the number of forex pairs available. It’s hard to keep track of all these different currency pairs and markets.
Yes! It’s true: the best way to learn to trade forex is to start small.
Start by focusing on 5-10 currency pairs, and add more once you have time. You’ll still be able to maintain a manageable list of these pairs, but you’ll have time to study them and figure out their strengths and weaknesses.
Putting what you learn into practice will be infinitely more straightforward when you don’t have too many options at your disposal. By limiting yourself, you’re also making it easier for yourself—and we all know how much easier it is to act on something when we know there are fewer options! |
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