3 Reasons Why You Should Have a Favorite Forex Market to Trade
A lot of traders who are just getting started in the Forex markets find it hard to decide on which currency pairs to trade, and end up looking at 10, 15 or even 20 pairs. That is not the right way for beginners to approach Forex trading, and it only leads to confusion and unnecessary losses. A better way to begin your Forex trading career is to have a favorite market that you trade. This means is that there should be at least one market that you trade more often than others, and that you are more knowledgeable about in every aspect.
Become an expert in the market
Being intimately familiar with a market means you become a specialist of sorts, and, as you know, specialists make the most money in any particular field. A great example is when you compare an ordinary GP to a Brain Surgeon. This is not to say that you must only trade one market but as a beginner to Forex trading, it is advisable to focus on just a few markets, one of which is your favorite. If, for instance, your favorite market is the EUR/USD, then you will find that eventually you will come to know how the currency pair moves, what moves it when it moves, and so on.
Avoid over-trading an over-analyzing
Another major advantage of having a favorite market in trading is that it helps you to avoid over-trading. All successful traders will tell you that one of the most important things when it comes to profitable trading is to keep things simple. As you analyze the markets, the fewer variables you have to deal with, the better for your trading success. When you have just one favorite market you will have a natural guard against over-analyzing and ultimately over-trading. Less is more in trading. By focusing on just one market primarily, you can reduce the temptation to jump into trades and ultimately avoid the mistake that a lot of new traders make which leads to excessive losses in the long run.
Manage your risk properly
Having a favorite market also helps you to manage your risk properly. Usually, when traders are involved with too many different pairs, they wind up over-leveraging their accounts because they are in multiple trades on different pairs at the same time. This often leads to loss of money because most pairs are correlated and this just increases their risk. It is never a good idea to take a lot of trades at the same time in Forex, and this is another way that having a favorite forex market helps you contain your risk and acts as a deterrent against trading behavior that can lead to huge, unnecessary losses.
In conclusion, as a beginner, you should try to focus on only one market for a month or two, until you feel that you really know how it flows. You can slowly add more currency pairs as you master the market and your trading improves.