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The number of different currency pairs can be overwhelming for new traders. However, it’s possible to successfully navigate this sea of trading possibilities with some forethought and research. If you’re starting out, here are a few factors to consider when deciding how many currency pairs to trade in this post
How many trading pairs should a beginner trade?
It is recommended to start with trading only one or two currency pairs. This way, traders can concentrate on understanding the market and perfect their trading strategy before adding more markets to their portfolios.
It is important to note that beginners should not trade too many currency pairs simultaneously. Trading a lot of currency pairs will make it difficult for them to keep track of all the different opportunities that are available. It also increases their risk exposure, which is not what beginners should be focused on.
A beginner trader will need to decide which currency pairs they want to trade. The number of pairs is not set in stone, but it is essential that the trader is comfortable with the market and has a well-defined strategy for each pair.
How Many Currency Pairs are there on Forex?
The number of currency pairs available on the foreign exchange market today is more than 10,000. The good news is that you do not need to trade everyone.
In fact, as a beginner trader, you should probably focus on trading three or four different currency pairs at most so that you can properly manage your risk and know what’s going on in each of them.
When you’re starting out, it’s important to remember the popular ones: The less you lose, the more you make. When you start with too many currencies, it becomes difficult to stay focused on any one of them. So keep it simple!
5 Factors to Consider When Choosing Currency Pairs as Beginner
Deciding which currency is best to trade as a beginner depends on many factors. It is obvious that beginners have less experience in dealing with volatile pairs. They should make smart decisions depending on how much they can risk on their investment.
Let’s discuss factors in detail:
Trading Level
Traders with beginner level should be cautious when choosing more than one pairs. They can fall in trouble with managing risk in this way. They should trade in USD/EUR and GBP/USD. It will be less flexible but it will also be less risky.
Timeframe
As a beginner, it is important to think about the timeframe and your routine before choosing any pair. If you are a day trader, you will go for pairs that show high pip movement in the daily timeframe chart. If you are a scalper you will surely choose volatile pairs in short term time frame such as 5min or 15mint.
Account Size
If your capital is only $100, never go for more than one currency pair. For capital more than$500, you can think investing more than one pair. Here again risk management and trader’s experience counts a lot.
It’s wise to have 3-4 times the number of tradeable instruments as your account balance, so if you have $3,000, start with three or four instruments. You may want to keep adding an additional pair each month after each consecutive profitable month.
Trading Strategy
The trading strategy depends on your trading style. Traders can lose money in many ways when trading currencies, but if they make intelligent investment decisions, they can make a profit.
Choosing the pairs that you are comfortable with your trading style will eventually make you profitable. Some of the strategies are a chart pattern strategy, a technical analysis strategy, and a fundamental analysis strategy.
Risk Reward Ratio
If you want to get into foreign exchange trading, you’ll have to know what the risks are and how much capital you need. In terms of choosing which currency pairs to trade, you should consider your risk tolerance level and investing experience.
A trader with little experience or those who cannot afford to invest larger sums of money without putting their lifestyle at risk may not wish to invest in more than one or two pairs (such as USD/EUR and GBP/USD).
Best Currency Pairs To Trade as Beginner
Beginners should trade only one or two pairs for the first few months. This will allow you to understand the effect of your system on trading performance. Once you have a solid understanding of these, you can mix it up.
New traders find it difficult to pick their currency pairs. This is partly because there are so many options and partly because many don’t understand the differences.
To learn how many currencies to trade, let’s focus on five of the most popular ones: EUR/USD, GBP/USD, USD/JPY, AUD/USD, and NZD/USD. For beginners, it is best to start with one or two currency pairs and then move toward more advanced pairs.
Risk While Trading More Currency Pairs
Many new traders believe that the more currency pairs they trade, the better it is to make profit. The logic is that this will lower their risk by diversity their portfolio. The problem with this thinking is that it assumes those traders are successful at picking the winners.
It’s more difficult to be a successful trader when trading too many different markets and strategies. As such, experts typically recommend sticking to just two or three markets until you’re comfortable enough to add more.
A good rule of thumb is to choose one market that has an open position and one market you want to enter in the future.
Examples of these might be USD/JPY or EUR/GBP if you’re long; AUD/USD if you want to go short; or NZD/USD if you want to trade the kiwi against the US dollar.
This approach keeps your risks low while still allowing for some diversity in your portfolio.
Do I Need to Know Every Pair in the Market Before I Start Trading?
If you’re trading and currency pair, then yes, if you have time to study and learn every pair. But most people don’t have the time or inclination to do that, so they focus on one or two pairs in which they plan to invest significant money over the long term.
You might also want to trade currency pairs with similar movements. For example, USD/EUR are traded as fiat currencies but move in opposite directions when economic events happen.
That’s because the US economy is growing while Europe’s is shrinking. That means EUR generally falls when USD rises, and vice versa.
Currency Pairs To Avoid As Beginners
You should avoid trading some currencies if you are a beginner.
- *NZD/CAD – there are many more attractive currency pairs for Canadians than this one.
- *TRY/JPY- the TRY is only worth 2% of the JPY, so it’s not worth your time.
- *AUD/CHF – The Swiss Franc has a very high-interest rate, making it risky.
- *NOK/CHF – Norway has too much negative sentiment around their current economy.
- *SEK/CHF – Sweden also has too much negative sentiment around their economy right now.
FAQ
How many forex currency pairs should I focus on?
The number of currency pairs you want to trade will depend on your trading style, but generally the more the better. You can diversify by trading different styles of currency pairs: (1) crosses such as EUR/GBP, EUR/CHF and GBP/JPY; (2) major pairs such as AUD/USD, USD/CAD and EUR/AUD; and (3) exotic pairs such as CADCHF or NZDUSD.
Which Currency pair is most profitable in the world?
One of the most heavily traded pairs in the world, the EUR/USD has exchanges with virtually every broker due to its presence in the EU and U.S., two regions that makeup about 50% of all global economic output.
Which currency pair is most predictable?
EURUSD is one of the most predictable traded currency pairs. This can be attributed to the fact that it includes two of the largest economies in Europe. The Eurozone and the United States have different types of currencies, making it difficult for these currencies to stay balanced.
Final Thoughts
There are hundreds of currency pairs to trade, but not all pairs will provide an equal opportunity for profit. For beginners, it is best to pick one or two pairs that you’re most interested in trading and then stay away from the rest.
You can increase your holdings as you gain experience and confidence in the market. You may want to begin with five pairs so that if one goes against you, it won’t wipe out your account.
One strategy would be using a high-risk/high-reward strategy on three of the five and a low-risk/low-reward strategy on the other two pairs.
To summarize, the best way for beginners to start trading currencies is by trading one pair at a time and then gradually adding more as they get more experience with the market.
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