Trade One Currency
Trading one currency is good for you if you want to master and know the trait of a particular currency so that you would know how one currency behaves than the other currencies. It is like dating and you make your partner be your soulmate by not cheating with a more attractive person. So, by focusing on one currency, you accept that currency of your choice to be your partner.
Now we know the benefit of trading one currency. However, what is the drawback of it? Well, to answer this let me give you a real-life example so that it would be easier to understand rather than using this and that theory. Say, you have a partner in which during your partner's bad conditions you always be there for your partner while at the same time you have a choice to leave and cheat with a more attractive person but you choose to stay with your partner. I bet you understand the previous example I gave you and this is closely related to forex trading in which you stay with that currency no matter that currency is in bad conditions or not.
In short, if you are trading one currency you would be able to understand that currency of your choice better than other currencies. However, at the same time, you have to be able to withstand that currency when the bad time comes to the currency of your choice. In the forex example, you trade EUR/USD pair which always gives you tremendous profit due to its trending market, and when the bad time comes such as sideways, you still choose EUR/USD pair as your only one and main forex pair you trade.
Trade Multiple Currencies
In the above section, I gave you the benefit and a drawback of trading one currency. Therefore in this section, I would give the information you could consider, that is the benefit and a drawback of trading multiple currencies. Okay, trading multiple currencies are good if you want to diversify your risk. This could be seen in a real-life example where you buy various food ingredients to make a special food as with one ingredient you could only make a plain food and this is the same with forex where you have the main currency that you trade but you also have other reserve currencies you trade to have a special result in case the main currency does not perform well.
After the benefit above, this is the drawback of trading multiple currencies but before moving into that, it is better to look at this real-life example in which it is connected to the previous example. Okay, take that you already have various food ingredients that you bought before but you do not know how to make a special food with that ingredients and after you cooked the food, it ended up the food you cooked is not edible and not tasty. This could be connected to forex trading where you do not know well with the currencies and ended up messing up with them, for example, you trade trending strategy in ranging market conditions and vice versa.
So, to sum up, if you want to trade multiple currencies, then, you have to be prepared to do the work where you have to familiarize yourself with the multiple currencies you choose to trade, at least, know the basic things about them before you trade them. For example, you trade AUD/CAD, AUD/USD, USD/JPY, or more other currencies, and to be able to trade them you have to analyze them whether you are using technical analysis or fundamental analysis or even both of them which requires a high level of concentration and focus because you have to be wary of the sudden move of the market that usually caused by the news.
Conclusion
So, from the above explanations, let me ask you, which one should you choose? Should you trade one currency or trade multiple currencies? Well, before answering my question I suggest that you ask yourself first and adjust it to your personality whether you want to master one currency or diversify the risk by trading multiple currencies. For example, you are more inclined to diversify your risk by trading multiple currencies because you know if there is a bad currency that ends up in bad conditions, you have other currencies that would cover that, however, at the same time if you do not know how to trade multiple currencies it could end up doubling your risk of losing your money.
Written by Andre I.
Reference
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