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Thread: Forex Trading - Earn Bigger Profits Now By Applying the 80:20 Rule

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    Default Forex Trading - Earn Bigger Profits Now By Applying the 80:20 Rule

    The 80:20 rules applies in many spheres of life and if you know what it is and apply it in forex trading you will increase your profits dramatically. So let's take a look at what it is and specifically how to apply it to forex trading.

    In the late nineteenth century an Italian economist named Vilfredo Pareto observed that, in his native country of Italy, a small group of people held nearly all the power, influence, and wealth.

    Came to the conclusion that in most countries, about 80% of the wealth and power was controlled by about 20% of the population and he referred to this as:

    "Predictable imbalance," which became known as the 80:20 rule.

    He concluded that in relation to an individual's effort:

    20% of your effort or energy output will produce 80% of your income furthermore, 20% of your time will produce 80% of your work out put or income.

    Does this apply to forex trading?

    Yes it does and the lesson you can learn from the 80:20 rule is to work smart not hard. Concentrate your effort on the trades that have the best risk reward.

    Cut The Number Of Trades You Do

    It's a fact that most traders trade too much and execute trading signals to often, as they want to force the market to give profits, but of course profits cannot be forced.

    The way to apply the 80:20 rule to currency trading is drop your frequency of trading. If you look at forex charts you will see that there are very few big trends each year but when they do occur they produce huge profits.

    How do you spot them?

    Here is a checklist

    1. Look for valid resistance levels, that if broken are considered significant by the market.

    2. Learn how to use a breakout methodology and go with breaks of these support and resistance levels.

    3. To increase the odds even further make sure that you use momentum indicators to confirm that price momentum is supporting a break.

    4. As you are trading less you can afford to risk more on these trades and increase profitability.

    5. Don't trail stops to close and have a profit target that relates to the size of the break. The above method will ensure you are trading a lot less and it could be as much as 80%, but your profitability will be increased.

    It's a fact that most of the big profits are generated from trades that break from new market highs - NOT market lows.

    So if you have been buying dips its time to re think your forex trading strategy.

    Trading Less for More Profits

    If you like excitement and the thrill of trading this strategy is not for you. The above strategy is all about making money and trading the trades with the best risk to reward which can yield triple digit annual gains.

    If you have been trading and making marginal profits, apply the 80:20 rule to your trading, cut the frequency of trades and increase the profits!

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    We know all the above statements but could you pls share how to implement it in real trading ? Not just the Newspaper article. Now we are trading and we need the real system just to make a little pips. Not much..

    Economic theory can be found anywhere but the real system how to beat the market will be a different story, right ?

    Now lets discuss about the trading not economic situation or theory. We an also write a good article here like an expert but nothing to do with gettig pips.

    Nic

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    Intraday Master etrader's Avatar
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    It's a good topic and certainly true,

    but I feel it is somewhat subjective and not practical

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    Well I am a beginner yet........ and I am trying to learn. this is such a vast subject.

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    Well it can be said that 80% of your losses come from 20% of your trades, so watch out for those days where you are loosing a lot.

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