When new traders first start out they might watch 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 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 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 behavior because not only they are 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 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.
The benefits of focusing on a 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 countries 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.
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.