GOLD Trading for Dummies

Today I'd like to discuss some pros and cons of trading multiple currencies versus sticking to just one pair. When I first started trading, I was all over the place, taking the procedures I was learning and applying them to as many currencies at a time as I could. There are advantages to this type of strategy, the biggest one being that you don't have all of your eggs in one basket. If one trade goes the wrong way, you may have another one to go the right way and more than make up for the bad trade. This strategy, I'm sure, works very well for many traders, but it wasn't working for me. Here are the reasons why it may not be a good strategy, especially for new traders:

1. You will need to maintain a relatively high account balance if you want to trade multiple currencies simultaneously and you can very easily exceed your 2% risk factor if you're not careful.

2. Managing trades in multiple currencies requires constant monitoring, especially if you're working on a shorter term time frame. If you have a life outside of trading, like I do, you will need to subordinate everything else you're doing in order to monitor your trades.

3. Managing multiple trades can sometimes be confusing, and the likelihood of making mistakes is greatly increased. I know that we're all smart people, and we all pay very close attention to detail, but we/you WILL make stupid mistakes that cause you to lose money. Anything you can do to minimize your likelihood of making them will improve your overall profitability.

4. This final point is the most important one. Think of each currency pair as having living, breathing personality characteristics. Each one is uniquely affected by different news events, movements in the markets, etc. While some people have the time to become experts in each individual currency and learn how each behaves, I don't have that kind of time, and my brain can't hold that much information, much less recall it when I need it.

I decided a long time ago that my best strategy was to stick to ONE currency pair, and my life has been so much better ever since. I've tried several, including GBP/USD, GBP/JPY, XAG/USD (silver), and XAU/USD (gold). I have finally settled on gold mainly because the volume seems pretty strong right now, but that's not to say I may not switch again at some point.

Before you become a serious trader, you need to decide if you're going to have a multiple pair strategy or a single pair strategy. Then, if you decide on a single pair, decide on which one. The technical procedure I'm going to share should work with most currency pairs, but the emotional factors will vary. You will learn about these factors through your own experience of trading while paying attention to the markets, as well as from the experiences of others.

One other point I should make is that if you decide to become a single pair trader, this decision does not preclude you from using an alert system, in addition to trading your own strategy. The reason is that someone else is doing the work with the alert system, and all you have to do is follow instructions. Using the alert system helps give you back the advantage of trading multiple pairs without all of the disadvantages. Just watch your margins!