Enhance Your Profit Potential

by : Kelly Price

The 80 / 20 rule will help you make money in forex trading and if you are new to forex trading or trading already and not making enough money this forex trading tip is for you.

The 80 / 20 rule is simple.

It simply states that:

80% of your success comes from 20% of your efforts.

Let's take a simple example of a sales organization.

It's well known that 80% of the income normally comes from 20% of the clients.

In trading terms therefore: 80% of your profits come from 20% of your trades and the rest (80%) give you just 20% of your profits.

If you think about the 80 / 20 rule, you can apply it to many areas of life and try applying it to your forex trading and you will see it makes sense.

So what should you do?

Cut your trading frequency!

It's a well known fact that most forex traders try to hard, they think they need to trade a lot or always be in the market to win.

What happens?

They take low odds trades and lose. Keep these two points in mind:

-Unlike most activities you don't get paid for effort in forex trading you get paid for being right with your trading signal and that's it.

-The amount of trades is NOT In any way related to your profit potential.

To give you an example - I know traders who trade less than once a month yet make 100% + annualized gains!

The fact is most short term volatility in forex trading is random. This means you can't get the odds on your side and you won't win. Ever wonder why you never see a winning day trader or forex scalper?

Well, the reason is they trade to much and trade low odds or trades and this means an erosion and eventual wipeout of equity.

If you trade longer term, your chances of success with your forex trading system will be more because you are focusing on high odds trades.

If you really want to win, use the 80 / 20 rule and get the odds in your favor.

Try trading long term high odds trades and trade valid breakouts to new highs and lows (most major moves start from them), be selective and follow the market action and lock into these big breaks and follow the big trends that develop.

The 80 / 20 rule is logical in life and in the forex market and if you understand it, you can make big gains.

Many people like trading frequently - but their just playing a game and not interested in making money, it's a thrill seeking exercise - personally I would rather go Scuba Diving!

If you believe forex trading is all about making money and NOTHING else, then you will see how you can use the 80 / 20 rule to your advantage.

Think about the above and using it in your forex trading strategy and you maybe glad you did!