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Managing a Forex Portfolio

Managing, Forex Portfolio, Technical Analysis, fx trader, forex

A good trader knows how to manage a portfolio. All too often, traders make the mistake of having a single entity such as the EURUSD or Gold or maybe even just a group like The Majors as part of their portfolio. There are varying reasons to this such as a lack of good software tools and a failure to understand that money flows between instruments and markets. A common reason I hear is that traders believe a currency has “a personality” and that by getting to know that currency and building an attachment to it is the way to extract consistent profit. This often-taught approach is a fallacy and a false economy.

Your attachment to any instrument should only be for as long as it is paying you and the most lucrative period is when an instrument is in trend - trends being defined using the monthly, weekly and daily time frames. The point to note is that trends move between currencies and between markets - FX, Stocks and Commodities - and a good trend can remain in play for months.

A large portfolio will do far better over the long term than a small portfolio and identifying trends in play is actually a very simple process. Once a trend is in play, the returns, for an initial small risk, are exponential as a trader can compound or scale in or add new positions. 

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