Henry James512 Scott

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What is diversification in forex and why does it matter?

Diversification spreads risk across different strategies, pairs, and timeframes. Institutions diversify portfolios by combining trend-following, carry, and arbitrage. Retail traders often concentrate too much on one pair, like EUR/USD. Benefits: smoother equity curves, reduced drawdowns, and resilience when one system fails. Risks: over-diversification dilutes performance, while under-diversification magnifies risk. Balanced diversification might include trading major pairs, adding commodity currencies, and using both swing and intraday systems. Diversification in forex reflects the broader investment truth: survival depends on spreading exposure wisely, not betting everything on a single outcome.