Although there is no hard and fast rule to follow while trading currency pairs, there are some techniques a beginner trader might use. You can trade as much as forex pairs as you want because of no limitations attached to the market. However, one must have a strategy to avoid risks involved in forex trading. You can either stick to one currency pair or go for multiple currency pair trading depending on your preferences. Let us go through the pros and cons of both type of currency pair trading in detail!

Trading a Single Currency Pair

There are several benefits to trading only one currency pair. Understanding its subtleties will make it simpler to anticipate its actions and "understand its news." In this method, one gains the advantage of knowing the expected price direction in advance. It is feasible to trade with the trend if the currency pair you choose to marry is trending in one way. Also, it does not matter whether the trend moves up or down. In this case, the trend becomes your ally for the duration of its existence.

Trading a single currency pair enables the trader to focus all of his attention on one area, reducing distractions. Trading just one currency pair enables you to concentrate properly, like in the case of low-time frame scalping. Consider trading numerous pairs utilizing a scalping strategy in 1 minute.

What if the two currencies in the pair unexpectedly start to outperform one another? Trading opportunities that were previously available from the technical indicators of markets with significant trends start to fade suddenly. The same is valid if both assets in the pair become weak concerning each other.

Additionally, because there are fewer deals they may enter into when trading only one pair, most traders are not in support of doing so. This gives them the impression that by not participating in open transactions from other currency pairings, they are losing out on trading possibilities.
One problem that traders of one currency pair encounter are consolidation. What if the currency pair follows a strategy of consolidation over days, weeks, or even months inside a limited range of barely a few pips? What would be the sources of investment opportunities? There wouldn't be many low-risk trading opportunities, which may make you a very unhappy trader.

Trading Multiple Currency Pairs

Thus, the concept of trading numerous currency pairings is introduced. You may search through several currency pairings to locate trading setups with maximum possibility of potential winning trades by varying your trading portfolio. Making the most use of forex linkages is one benefit of trading various currency pairings.

To improve your odds of winning, you can trade two or more connected currency pairings here. The ability to use various trading methods regarding the technical and basic analysis relevant to certain currency pairings is another benefit. The ability to pair currencies according to their potential importance is a third benefit of trading numerous pairs of currencies.

Key Points:

Given enough fluctuation, there will be a purchased bias towards the AB currency pair. Particularly, if currency A is stronger and currency B is particularly weak. For more trading choices, the trader may then search a wide range of currencies and pair them according to relative strength vs weakness criteria.

There are advantages and disadvantages to choosing one/multiple currency pairs to start with. The quantity of vulnerability of capital that traders are willing to commit to, together with their trading style and skill, may all play a significant role in the decision-making process.