The 80 – 20 rule is a simple rule which is used I many areas of life and if applied to Forex trading it can help you see greater Forex profits – it’s frequently used inหนังชนโรง business andately has been applied to Forex trading but does it work?
It does and its found its way into many of the world’s best trading systems and if youหนังjav incorporate it in your Forex trading strategy, you will increase your profitability.
The 80/20 rule was developed by Italian economist Vilfredo Pareto to describe the unequal wealth in his country. He saw that 20 percent of the people owned 80 percent of all the wealth.
The 80 / 20 rule has been applied in many areas of life and in business markets it hasหนังใหม่ชนโรง become a common way to share out wealth and it is considered a principle of management and competitive advantage.
The theory is simple to understand and implement and its based on the fact that 80% of a company’s profits will be generated by only 20% of the clients.
The 80 / 20 Rule applied to Forex
One of the reasons it works in Forex is that currencies are traded in pairs and Pairs work in หนังavthis way:
symbol value1 = base currencySymbol value2 = quote currency
The currency with the higher value is base currency and the lower is quote currency.
You might see a currency pair of EURUSD, with USD at the base, and also GBPJPY at the quote. This is the EURUSD in the base, and GBPJPY in the quote. The value of the base is always calculated first and this information is used to get the quote.
The way the value of theคลิปหลุด base is calculated is subtly interesting … I will tell you Keep it simple!
The base currency is calculated by this formula (just a reminder):
(Spot value x average trade size) / (Quotes percentage x exchange rate)
Spot value is the amount of money you would receive if you were to open and close a trade at the current value of the pair.
ologists will calculate the spot value at which a currency pair is bought or sold for actual dollars. This is done as a direct result of the currency fluctuations and shown through the quotes.
averages the trade size is used in the formula to create a value for the base currency, the trade size is the same as the value of the quoted currency, and the exchange rate is the rate at which one currency is converted into the other.
Applying the above formulas to the currency pair indicates if you should be long or short the pair you are trading. Long indicates you should be buying. Applying the MQL4 code to the currency pair indicates if you should be long or short the pair you are trading. Right or wrong – you should decide how to read the movement of currency prices.
movements in Forex rates are noted in what’s known as the 4 figures. When the 4 figures are Together:
USD 90% + USD 10% + USD 90% = 100%
USD 10% + USD 90% = 100%
USD 5% = 150%
JPY 100% + JPY 1% = 100%
To calculate whether your Forex position is too risky you need to compare it with the possible reward.
The calculation of the reward to risk is compared with the risk based on your financial goals and the expected number of pips that you want to make.
You can then choose whether to open a long or short trade. Forex is a potentially very profitable profession. If you decide to become a full time trader, it is entirely possible that you will earn a very attractive income.
However, if you decide to learn Forex and become a full time trader, you have many more challenges to overcome.
Full time Forex traders work long hours, many hours per day. They are not allowed to take breaks during the day. Every decision has to be made almost immediately as currency rates can fluctuate very quickly. Some traders prefer to take a short break once or twice a week. All that may be fine if you have the patience of patience.
Many traders prefer to use automatic software instead of working the usual 9-5 jobs to earn money. The software can continue working for them while they are sleeping at night. This might be fine if you are not concerned with lost productivity but if you are, it might be best to limit the number of different tasks you need to complete each day.
The value of the currency pair is always relative. What the currency pair has changed in the last 24 hours is less important now that you have traded the pair. Out of 100 trades the trader is likely to make 80% and 90% are winners. If the trader becomes very focused and emotional about the trading activity then this will affect their profitability.