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 80 20 rule forex charts, influence, and wealth. Predictable imbalance,” which became known as the 80:20 rule.
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. 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. Look for valid resistance levels, that if broken are considered significant by the market. Learn how to use a breakout methodology and go with breaks of these support and resistance levels. To increase the odds even further make sure that you use momentum indicators to confirm that price momentum is supporting a break.
As you are trading less you can afford to risk more on these trades and increase profitability. Don’t trail stops to close and have a profit target that relates to the size of the break. 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.
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! Forex Trading Advice – Which is Best to Make Big Profits? Forex Trading Strategy – Why you Cant Predict Currency Prices!
Forex Trading System – Beware of This When Choosing One! How Has The Internet Opened Up The Forex Industry? In 1906, Italian economist Vilfredo Pareto created a mathematical formula to describe the unequal distribution of wealth in his country. Pareto observed that twenty percent of the people owned eighty percent of the wealth. In the late 1940s, quality guru, Dr. 20 Rule to Pareto, calling it Pareto’s Principle. Pareto’s Principle or Pareto’s Law is a useful tool to help you prioritize and manage the work in your life.
20 Rule means that in any situation, 20 percent of the inputs or activities are responsible for 80 percent of the outcomes or results. In Pareto’s case, it meant 20 percent of the people owned 80 percent of the wealth. 20 rule to quality studies, he identified 20 percent of the defects causing 80 percent of the problems. 20 rule to in our personal and working lives. Most of the time, we are referencing Pareto’s Rule without applying rigorous mathematical analysis to the situation. 20 rule suggests we should focus on the few, larger items that will generate the most significant results.
The list might not grow much shorter, but you will be practicing effective prioritization. In assessing risks for an upcoming project, not every risk carries equal significance. As a sales representative, work hard to understand the attributes of the 20 percent of your customers that make up the majority of your revenues and invest your prospecting time on identifying and qualifying similar customers. 80 percent of your customers that generate approximately 20 percent of your business and identify opportunities to shed those customers for those that drive better results.
Some managers and firms actively cull their customer listings every few years, effectively firing the bottom performing customers. 20 distribution where 80 percent of your customer calls or support issues are attributable to either 20 percent of your offerings or 20 percent of your total number of customers. Entrepreneurs, soloists, and independent professionals should evaluate their workloads and assess whether the gross majority of their time is spent chasing small value activities, including administrative work that is easily and inexpensively outsourced. When evaluating your mid-year progress on your goals, focus on the few goals or activities that are most critical to your development or success. Similar to the task list, not all duties and goals are created equal. 20 Rule has many applications in our work and personal lives. However, there are opportunities to misapply this tool and make critical mistakes.