Finding Your Forex Favorites

Everyone has favorites in life. A favorite color, a favorite animal, favorite foods, favorite sports and even favorite athletes. But when it comes to trading Forex, many traders are hesitant to commit to a favorite currency pair, focusing instead of a few preferred pairs without really taking the plunge or committing themselves to one specific pair. The psychology behind this fear of commitment is complicated and closely related to the concept of Forex trading psychology in general, specifically the idea that you don’t want to miss out on profits by overlooking less-favored currency pairs. However, it can be argued that there are distinct, measurable benefits of choosing a favorite Forex pair and focusing on this pair with extra care and attention.

Forex Favorites

Think of Yourself as a Professional

How many doctors do you know that specialize in multiple fields? There are few dermatologists that are also gastroenterologists. Likewise, in sports, there are few star basketball players who are also top gymnastics or baseball experts. If you are interested in Forex trading as a serious pursuit, either as a hobby or as a profession, there is no shame in choosing a specific pair to ‘specialize’ in. In fact, having this type of laser focus should make you more successful at handling your favorite pair and will give you the confidence you need to make more profitable trading decisions.

The Benefits of Being Focused on One Pair

Specializing in a specific currency pair will also give you insights into the way those currencies dance within other pairs, so that you’ll have a solid foundational knowledge if you do wish to dabble in the trading of other currency pairs. A professional football player, for example, may be an expert in passing, but he can also excel at running or kicking, a result from playing a sport that touches upon multiple disciplines. The same is true for currency trading – if you are totally familiar with how one specific currency pair responds to market events, you will have a better understanding of how those two specific currencies will react in relation to their other trading partners.

Another benefit of specializing in only one currency pair is that it prevents you from wasting time analyzing irrelevant pairs so that your trading time is spent focusing on what’s really important. Most specifically, when you’re highly focused on one (or maybe two) trading pairs, you will have the time and energy needed to really create a solid trading strategy as well as a strong risk management strategy to go with it.

One of the biggest temptations for traders is the desire to open too many trades and to over-leverage themselves, which can cause significant losses. If you’re not looking at more than one pair you won’t have the temptation to enter a trade on a currency pair that you’re not entirely familiar or comfortable with, thus serving as an automatic protection of your trading account.

Conclusion

Many Forex traders, especially new traders, are eager to test out different Forex pairs and to launch a lot of “arrows” in the hope that one will hit the target. While this strategy sounds interesting in theory, in practice it puts your account at risk and provides false confidence that can lead to losses. Choosing a favorite Forex pair and devoting your time and energy to taking the most profits from this pair will have measurable results in the long run and will allow you to gain deeper understandings of the market as well as the confidence needed to prevent psychological stumbles during trading.