Some people feel that variety is a good thing when it comes to trading. They suggest that you trade in different markets to spread your knowledge and open you up to new opportunities. But, here, we’ll talk about the opposite. Here, we’re going to discuss the benefits of focusing on one market, or at least narrowing your focus down to a small handful of markets. We’re going to argue that it is good to have a favorite trading market.
Become a Specialist
Specialization is the key to success in any area of life. Think of a surgeon – without time, practice, and focus, specialization would not be possible, and neither would success. The same is true for lawyers, pro athletes, and traders. There are so many variables when it comes to trading markets. If you’re trying to focus on 50 different markets, analyze all the charts, and apply your strategy to each one, you are bound to fail. On the other hand, if you have 4 or 5 markets to look at, you’ll become familiar with those markets, gain a better understanding of what moves prices, and you’ll become an expert trader.
Avoid Over-Trading
One of the main downfalls of new traders is that they fall into the trap of over-trading. When you’re trying to be successful at something, it is common to try repeatedly until it works. The problem is that when it comes to trading, less is often more. In fact, it has been shown that traders are more successful when they spend less time in front of their screen. It stands to reason that if you’re trying to trade 50 markets at once, you run a much higher risk of over-trading than if you trade 5 markets. Focus your energy and your time on successfully trading in a favorite market. Another pitfall that comes with over-trading is over-leveraging. When you’re trying to trade too many currency pairs at one time, you often become over-leveraged. Trading in only a handful of markets helps to manage your risk more successfully.
Avoid Over-Analysis
If you’re focusing on 50 markets, it is very difficult to remain clear-headed. With all of those details, charts and analyses floating around in your head, you’re likely to end up confused and stressed. This leads to over-analysis which is a major pitfall to successful trading. Rather, pick a favorite market and focus your analysis there. This will help you improve your knowledge of the market and your understanding of what moves prices. Focusing on a favorite market is the first step on your way to success.
Bottom Line
New traders especially are often tempted to spread themselves thin in the hopes that they’ll find success in at least one market. The problem with this approach is that you never become an expert in anything. It is far more worthwhile to focus on one market (or a handful of markets) in order to improve your skills, increase your knowledge, and become an expert in that market.
