The benefit of working with a limited palette is that you get to really understand the pigments in your palette and how they work together. With a limited palette, you are able to think less about color and more about shape and value, warm and cool, and light and dark. The other main advantage of using a limited palette is that your finished painting will have a much more harmonious look to it.
If you take the time to really study your reference, whether that be a photograph or from real life, you should be able to ascertain the range of tonal values that comprise the scene. If you analyse those tonal values then it will become more apparent what colours will be needed to be mixed to achieve them within the finished watercolour painting. This in itself will then dictate the limited palette you will need to be able to mix the tonal range required. Experiment on a scrap of the watercolour paper to get a feel for the mixes you will need and how they will dry on the paper. Taking into account the fact that watercolour always dries lighter than it appears when wet.
It is also important to use the same set of colours and washes in the shadows that are placed in the painting. Again it helps with colour harmony and makes the whole scene come together in a balanced way.
Deciding all of this before you begin the painting process will help you achieve a better final painting and help you to be more confident that your finished painting will work from the outset.
I would suggest that your limited palette for any watercolour painting should contain a carefully selected set of somewhere between 6 and 12 colours. It is important to have both a cool and a warm version of each colour in the palette. You will hear this expression, cool and warm, a lot in the watercolour world and it is a concept that you need to both understand and feel comfortable with as soon as you can.
A typical limited palette would contain two yellows, two blues and two reds, cool and warm of each. To this you can add the earth colours, Raw Sienna and Burnt Sienna and maybe yellow ochre too. Paynes grey is also a versatile colour that can help but is not essential as you can mix almost any grey needed from your other colours. The Sienna's are useful for toning down any green mixes made from the yellows and blues.