Forex Trading Library

Diversify your risk for more stable returns

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Diversification is typically an important part of a prudent portfolio manager’s strategy, which basically implies that they avoid putting all of their eggs into one basket. For a forex trader this means that trading more than one currency pair could well be a good thing, since a loss on one trade in a particular currency pair could be balanced by a gain on another trade in a different currency pair resulting in more stable returns for their forex account. Of course you will want to avoid the situation where you are trading too many currency pairs than you are comfortably able to focus on. Hence, it is usually preferable to choose a small number of currency pairs to research and familiarize yourself with before taking forex trading positions in those pairs.

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