Is it good to trade multiple pairs?
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I dont think it is riskier, in fact I'd say it can make trading safer depending on the pairs that you trade. Many people talk about a diversified portfolio, why? because should you have read EurUsd wrong at least there is a chance you got it right with another currency.
Also if you are trading Eur/Usd for example, and you also trade cable GBP/USD and say AUD/USD you can use this to correlate the strength of the currency (generally up or down compared to other instruments) and make a more accurate and infomred decision before committing to a trade.
Thats my 2 cents, im hoping i'm hoping this isnt just my subjective theory.
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Originally posted by 4nt5I dont think it is riskier, in fact I'd say it can make trading safer depending on the pairs that you trade. Many people talk about a diversified portfolio, why? because should you have read EurUsd wrong at least there is a chance you got it right with another currency.
Also if you are trading Eur/Usd for example, and you also trade cable GBP/USD and say AUD/USD you can use this to correlate the strength of the currency (generally up or down compared to other instruments) and make a more accurate and infomred decision before committing to a trade.
Thats my 2 cents, im hoping i'm hoping this isnt just my subjective theory." />
got ur point :).. Of course diversifying ur portfolio definitely decreases risk. But isnt it difficult as more currencies you want to trade, more analysis you have to do. Also you will get less time to analyze a currency especially when u arent a full time trader.
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im far from being a full time trader, however i think there is a lot less analysis than u think with correlation... obviously u use an anaylsis on the pair you are about to trade, but the other two pairs are just a reference as to whether the currency is also bullish/ bearish againts others too (context.)
PS. once you get the hang of it i suppose it also becomes semi-auto/automatically processed in your mind.
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By analyzing accounts here on fxstat, most of the traders are trading 1 to 3 currency pairs max. So it is obvious that only a few traders try more than 3 pairs. Most of the traders do not know correlation because correlation is something that cannot be easily learned. It is a complicated concept.
The bottom line is your comfort level defines how many pairs u can trade.
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Originally posted by 4nt5im far from being a full time trader, however i think there is a lot less analysis than u think with correlation... obviously u use an anaylsis on the pair you are about to trade, but the other two pairs are just a reference as to whether the currency is also bullish/ bearish againts others too (context.)
PS. once you get the hang of it i suppose it also becomes semi-auto/automatically processed in your mind.
Yea. Correlation is a powerfull technique. But it is not a simple technique as most traders think. For example if we use it as follows
1- Eur/Usd = UP
2- Usd/Jpy = Down
Conclusion will be Eur/Jpy = Down
But it doesnt help at all because you r making this decision on the base of an assumption that eur/usd and usd/jpy will continue to move in that direction. So this type of correlation is rarely benificial.
Another type of correlation is to correlate pairs one on one. For example some say that Eur/Usd and Usd/Chf are highly correlated pairs. That might be a benificial trade but such analysis require indepth knowledge of how correlation works.
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In my Opinion, Multiple pairs use is not good, to me any one or two pairs good for trade.
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Originally posted by umarbinbariIn my Opinion, Multiple pairs use is not good, to me any one or two pairs good for trade.
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It also depends on how much time you have. People only try to experiment when they have enough time to do so otherwise they stick with a few currency pairs.
What about you? r u a full time trader or part time trader?
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In my opinion, diversification of investment is necessary to minimize risk. But it is only valid if your investment is diversified in assets that you know has high probability of generating income. So it doesnt depend on number of pairs, it only depends how many pairs can you trade comfortably.
The good or ill of a man lies within his own will. – Epictetus