When new traders first start out they might have watched a few videos beforehand to try and gauge what the best strategy is, or which asset is the best to trade which is fine but there are so many retail traders who are the jack of all trades, and master of none. There is a huge disparity between the successful and knowledgeable traders who work in professional institutions or prop firms and those retail traders who supply the liquidity to those successful traders. The common psychology of a new trader is going after every single trade, and trading every single forex pair there is in order to capitalize on their movements in a bid to make as much money as possible. I can’t stress enough the dangers of following this sort of behaviour because not only are you chasing trades, but you are not acting like a real trader.
In the world of professional traders, you aren’t a jack of all trades, but rather you pick an asset class like crude oil and you to study it and only trade that one thing. This sort of career path is ruthless and if you are caught jumping between asset classes, they will simply fire you. If you are trying to become good at something, you look at who is better than you and you try to copy them, and it is the same with trading too.
The benefits of focusing on one single currency pair when trading far outweigh trading multiple currency pairs at once. First of all, you are far less likely to become distracted when trading one single pair and it makes it easier to focus on your analysis. Also, when it comes to trading every trader should have an element of fundamental analysis incorporated into their strategy, and so concentrating on one currency pair makes it easier to understand the economics and the fundamental drivers that govern two major currencies.
Take GBP/USD for example, both of which have very strong economies and have many different economic factors that can influence either one of the currencies. The fact of the matter is if you want to become a successful trader you need to go against the majority of what retail traders are doing, and that means trading every single pair under the sun and chasing trades that will lead nowhere. You need to focus on one currency pair and master it, and that means studying the economics of both the countries and learning how it can affect their respective currencies, as well as sifting through mountains of data from each country's central bank and discovering what they are paying attention to.
Central banks are the drivers of monetary policy and should be listened to whenever they release any statements regarding the monetary policy because as things change their outlook and stance will change too. For instance, if crude oil prices have risen far more than expected then the Federal Reserve might take on a more bearish outlook over the long term because as crude oil rises, consumer spending tends to decrease due to higher oil costs. Knowing information like this could potentially cost you hundreds of pounds, or even make you hundreds of pounds in the future because you know the ins and outs of a particular pair or commodity. Whereas most people will either ignore it or won’t know what to do with that information, which automatically puts you in a better position.
It is far more beneficial for a trader to concentrate on just one currency pair and master them both because as outlined above, you need to be able to digest information and adapt your trading plan to suit the new conditions. However, this is a far more arduous task if you are concentrating on multiple currencies at once. Going back to that phrase I mentioned before in that you shouldn’t be a jack of all trades and master of none. This might seem counterintuitive but a lot of things are when you first start off because you just want to get stuck in and with trading you just want to start making money. But you MUST resist this urge and concentrate on knowing absolutely everything about just one single Forex pair.