Basket trading is a popular risk-mitigation strategy for small investors. Another significant benefit of basket trading is that it allows clients and traders to operate their markets more efficiently. To reduce their risk exposure, many traders will create a basket trade with the help of hedging or different currencies. Hedging is attempted when long and short currency pairings are traded alongside one another. Doing so is illegal in many countries, including the United States of America. To solve this problem, the system of linked currencies could be used. The relationship explains the change in the proportion of the two currencies over a specific time period.

Basket trading involves executing multiple trades at once by buying or selling a "basket" of various financial instruments, such as stocks, currencies, or commodities. Instead of managing individual positions, traders place an order for a group of assets that meet specific criteria, allowing for diversification and potentially reducing risk.

In forex, basket trading can involve trading several currency pairs simultaneously, often correlated or grouped by region or market conditions. Traders may use this strategy to spread exposure across multiple currencies or hedge against market volatility. Institutional investors commonly use it but it can also be applied by retail traders to simplify portfolio management and reduce the impact of a single asset's price movement on overall performance.