How To Improve Your Trading

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Aug 19, 2011 10:09 am

sadscorpion User

Postagens: 513
Membro desde: 08/02/2011

I believe every trader constantly asking that question on how he/she can take he/her the next level. I have found this rule very useful and universal, and yet not many people paying much attention on it. So I guess it could be an edge once you understand it and utiiize it fully.
Rule of 80/20. Once understand it, you can apply it to many areas and knowing where to focus your energy to get the max output.
Basically this rule states that 80/20 is the proper ratio for many things at final end.
Example:
1. In US 80% of wealth is control in 20% of population.
2. 80% of your income will come from 20% of your skill set.
3. Freeway usage, 20% of the time will contain 80% of the traffic. (traffic jam)
4. 80% of the market volume came from 20% of the people.(Institutional involvement)
But a lot of time the ratio could be 90/10, 70/30 or 60/40. Basically the idea is that things are not evenly distributed as 50/50, there is bias toward one side and the ratio of 80/20 usually can give very good approximation.
so as an individual trader, how can we improve our end result base on this rule.
Basically, once you got enough data, you can then find out which system fit under this rule, then improve on this system

For example: you have 5 different systems. and one of them performs better then all other 4 systems, and produce the 80% of your profit. Then by increase position size on this system, you will be able to produce much bigger result.

Come to think of it, the famous turtle trading system utilize this concept well. Turtle system will add to a position when the trend is on its side, then keep adding positions until the market go against it.(but it dose have a max size allow for each position).
So in other word, when it catch a trend, it will capitalize on it. even with a 30%-40% winning ratio, turtle system was able to get an good annual return for its investors.
How about Ed Seykota from Market Wizards, he dose the same thing as the turtle system on the position size up. (add more position to a winning positions to capitalize on a persist trend)

These are some the best traders who max out this 20/80 rules. when that 20/80 ratio show out, capitalize on it will improve your trading result dramatally.
PS: I do not recommend people to just using trend-following system, especially on intra-day bases. These are just meant to be an example. Basically trend-following system needs a lot of money and nerve of steel, and most people just do not have that combination.(my opinion on trend-following system)

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Aug 21, 2011 04:34 pm

newentry User

Postagens: 29
Membro desde: 16/08/2011

i set my lot with big size and i just take 5 - pips in every trade, with this system so i can reduce the risks of defeat,and i think this system is suitable for me, i can get some pips and for consistent

please, share and give me some opinions about my system

[aww]

Aug 23, 2011 04:26 pm

illiterate User

Postagens: 561
Membro desde: 21/04/2011

If we can figure out our "profit making strategy" then obviously we will try to maximize our profit by implementing it. But the problem is to find out that "20%" and find a good strategy.

Aug 23, 2011 05:11 pm

widhie75 User

Postagens: 118
Membro desde: 05/12/2010

Originally posted by newentry

i set my lot with big size and i just take 5 - pips in every trade, with this system so i can reduce the risks of defeat,and i think this system is suitable for me, i can get some pips and for consistent

please, share and give me some opinions about my system

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How long you trade with your system? how big your lot compared your balance?.......if this big lot still on 5% MM rule, I guess it still safe......but dont forget your SL.........big lot, no SL is the only way to MC.

Sep 02, 2011 06:44 pm

sadscorpion User

Postagens: 513
Membro desde: 08/02/2011

Originally posted by newentry

i set my lot with big size and i just take 5 - pips in every trade, with this system so i can reduce the risks of defeat,and i think this system is suitable for me, i can get some pips and for consistent

please, share and give me some opinions about my system

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you must use a ea that auto set a sl when ever you open a new trade like for maximum of 40 to 50 pips and in this case if you are not using a good internet connection or you face any problem and disconnect from your broker for 30 min or more than your account can be burst in just one big move using ea for money monagment like this system is good in my point of view. what you says guys.

Sep 02, 2011 06:46 pm

sadscorpion User

Postagens: 513
Membro desde: 08/02/2011

Originally posted by illiterate

If we can figure out our "profit making strategy" then obviously we will try to maximize our profit by implementing it. But the problem is to find out that "20%" and find a good strategy.

every strategy is a good strategy if you are following its rules to 80 to 90% or even more and with tight money mangment you will get good results

Apr 25, 2012 05:44 pm

mrinalini User

Postagens: 177
Membro desde: 12/04/2012

The best way to improve your trading is to do constant learning and figure out the new and innovative ideas to improve the uality of your trades and make more and more profits.

Apr 27, 2012 05:14 am

FXlord User

Postagens: 75
Membro desde: 07/04/2012

I think there is no rule of 80% / 20%. For me these are just another wrong numbers!

May 27, 2012 11:50 am

CFXsignals User

Postagens: 359
Membro desde: 21/05/2012

How does this apply to forex trading though? Perhaps 80% of the time you are spent out of a trade, 20% in a trade? Yet thats the 20% of the time gives 80% of the opportunity to trade? No idea how its really helpful except as a nice anecdote.

Jun 02, 2012 11:49 am

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