Profit Yielding Strategies: Applying the 80/20 Rule
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The implication of the 80/20 rule in the realm of forex trading is that you should focus more on high quality trades that pay off handsomely rather than trading more frequently. This is actually one of the most common errors that most novice traders make when they are starting out to trade online... Too much trading. They will go for day trading, hedging and scalping for low odds trades which result in more losses than gains.
This mentality is due to the way we were educated and brought up to think in the sense that the harder you work, the more you will stand to gain. Unfortunately, the illusion of hard work doesn’t pay off when we are dealing with forex trading. The market is always changing and our flawed ingrained philosophy cannot cope with the dynamics of the financial markets. We need to adopt a paradigm shift in the way we think if we ever hope to profit from trading forex. This is the main reason why we get the forex veterans making most of the money in online forex trading. Research and surveys have proven such is the case.
Professional or experienced forex traders on the other hand tend to go for long term trades but pay off with high profitability. It is not uncommon to find these experienced traders making just a single trade once a week or even a month and still get a 100% return on their investment. The key toward profitability is to look for long term trades and learning how to use the forex charts properly to look for long term trends which could last for months.
Once you have identified such a long term trend pattern on your charts, stake your market position, hold on to the position and trail your stop loss to follow the long term trend. With the application of the 80/20 rule in your trading strategy, you will get to make more money, have less stress and also waste less time on unprofitable efforts.
Source: www.etoro.com
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