How Many FX Pairs Should You Trade?

This post is going to be slightly different to the regular analysis I've done in the past. Instead, i'm going to talk about something that improved my trading so much that I had to share it with you. If there's any one "tip" I would give anyone trading, it would be the one in this post.

I've always heard people say it's better to focus on only a few charts, especially when learning to trade. I never listened and thought that I could do better with more charts, as there would obviously be more opportunities. I can assure you this is not the case. Looking back on it, I had a form of FOMO (the Fear Of Missing Out). FOMO is usually talked about when traders impulsively buy or sell because they are scared they will miss "the move". However, in the bigger picture, having too many charts suggests one might have the underlying feeling of FOMO.

If you reduce the number of pairs you trade to one or two, you will eliminate a lot of the bad trades you take. The one or two charts that you trade will become much more familiar to you and the analysis on them will become detailed masterpieces. Your understanding of the market will improve significantly and you will learn the personality of your chosen market. This will help you make better decisions and in the long run will generate you more profit. I certainly believe your overall risk is likely to decrease. You will become more of a sniper, executing only the highest of probability trades and leaving the rest to pass by.

A lot of you will read this and never take any of this information seriously but I urge you to just try it for a week. If it doesn't work, fine. If it works well then maybe try it for a little longer. Compare the results you have between trading 20 pair and trading 2. I know that I found trading 1 or 2 made my life so much easier and my profits so much greater.

A potential problem people could have with this, is that they would then try and catch every move on the 1 or 2 pairs that they trade. This is, yet again, another case of FOMO. However, I believe, since one form of FOMO has already been defeated in trading only 1 or two pairs, this form of FOMO can be more easily overcome. I know it worked for me. As long as you journal your trades and learn from each mistake you make, then there's no reason why you can't improve.

To choose a pair to trade, I would do some 80/20 analysis on my current results. This means: what 80% of my profits are coming from 20% of the pairs I trade. Then narrow it down to your favourite pair or two.

Have a great trading week!

#WianStipp #Trading #psychology