Trader Dale Volume Profile

What instruments to trade?
What instruments to trade?
Did you know that many professional and institutional traders only focus on one or two currencies
or only a few another trading instruments? The reason for that is to enable them to become really
proficient with the instrument they chose.
A good analogy for why this is beneficial can be found by looking at the way lawyers practice law.
As a lawyer, you can specialize in many fields, but the best lawyers only focus on one particular
area. They have one field on which they concentrate all their time and effort, and this is what
allows them to be the best in their chosen area of expertise.
Professional traders know all the necessary aspects of the market they trade. They know the
average volatility, correlation to other instruments, the average impact of different
macroeconomic news, as well as average volumes. They know if the market tends to move in
spike or if it moves in a more subdued and calm manner. They also develop some sense of feeling
for their core market. It’s something that is hard to put into words, but it is there.
Now I’m going to break down the risk of trading too many pairs in greater detail, in addition to
how you can choose the right currency pairs to trade.
Correlation & Excessive risk exposure
The more some instruments behave like each other, the more correlated they are. If two
instruments have 100 % correlation, it means that they move the same way. If their correlation is
-100%, then they move in exact opposites. These are the extremes of the scale, but in reality, the
correlation numbers are somewhere in between. Here is a forex correlation table (from
www.Mataf.net) with major FX pairs to give you an idea about the correlation numbers:
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