FX Diversification or Optimisation

This article looks at whether you should diversify or optimise your FX trading.

Forex optimisation

There are a lot of traders who look at diversifying their forex trading.  When you do this you have to consider whether you should be diversifying your FX trading or optimising it.  These are two very different things and you need to determine which one is best for your trading.  If you do not take the time to determine this you could be doing the wrong activity.  This will lead to losses on the market that you could avoid.  It is important that you know what diversification and optimisation is as well as the ways that you can do this.

What is FX Diversification and Optimisation

Once you have experience on the FX market you are going to consider expanding your trading.  When you expand your trading you are going to be diversifying your trading.  Diversification will have you trading with more than one strategy and with more than one currency pair.  It is possible to diversify only one aspect of your trading.

When you optimise your trading you are going to look at the trading that you are currently completing.  You will determine what you should change in the strategy and what you should keep.  Optimisation of your trading allows you to tailor the trading strategy you have to your trading style and personality.

How to Diversify Your Trading

When you diversify your trading you need to first consider the risks that come with this.  Diversification of your trading can lead to lower profits.  This is due to the extra analysis that you will need to complete when you trade.  This extra analysis comes when you trade with more than one currency pair.  The more currency pairs you are using the more analysis you will have to complete.

There are many traders who look at diversification of their trading strategy.  When you do this you are going to be using more than one strategy to trade on the FX market.  This should help you find more trading opportunities.  However, it could lead to confusion and lower profits from the changes that you have to make in your trading.

How You Optimise Your Trading

Of the two options optimisation is the one that you should use when you trade.  You should only look at diversification if you are not getting the results that you want from the optimisation of your trading strategy.  The first step in optimisation is to deconstruct your trading strategy.  You should write out the strategy and determine whether or not it is simple.  If the strategy is complex then you have to find a way to simplify it.

Once you have deconstructed your trading strategy you need to look at how all the parts relate to your trading style and personality.  All the aspects of your trading strategy should work with your trading style.  They should also work toward your trading goals.  If they don’t then you will need to change them so that they do.  After making the changes to your trading strategy you need to test it on a demo account to ensure that it works.




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