Author: Kelly Price | Posted: 07-09-2007
If you are just starting out in forex trading or an experienced trader not making the gains you would like then these 3 tips are for you. There simple to learn easy to apply and could help you make triple digit annual gains so lets look at them.
1. Trade Less For Bigger Profits
Most traders think that they need to be in the market All the time in case they miss a move or the more they trade the more likely they are to be successful – but this is totally incorrect.
In Forex trading you make your money from being Right and that’s it – the effort you put in does not affect the amount of money you make. In fact in most instances the harder you try and more you trade, the greater your chances of failure.
Why?
Quite simply because the high odds trades don’t come around that often.
This philosophy is based on the famous Pareto principle the 80 / 20 rule.
The rule states that 80% of your results come from 20% of your activities.
This is true in many areas of life including trading Forex.
In forex trading by focusing on the trades with the best odds and ignoring the others, you can improve your profits overall.
By only focusing on this 20%, you will see bigger gains. This is really a common sense rule, yet few Forex traders stop to think about it. Most trade too much and try and force profits but if they were disciplined, patient and only focused on the best trades they would win more.
I know a trader who only trades about 6 times a year and yet they make over 100% annualized gains!
Think about trading less and you will see the logic of the above argument.
2. Don’t Diversify
When you do this resist the allure of diversification, it may reduce risk but if you have a high odds trade, why dilute its potential profit by diversifying with a marginal trade?
If you have a high odds trade go for it and this leads directly on to the next point.
3. Risk More Per Trade
As you only have one trade to focus on and it’s a good one risk as much as you can afford on it forget the accepted investment wisdom of 2 or 5% risk 10 25% minimum – if you believe in the trade go for it.
This is not being rash – its simply acknowledging an investment fact:
Risk goes with reward and the more you risk the more you can make.
This doesn’t mean being rash but your better to risk a lot on a high odds trade, than risk a little on a number of trades with poor profit potential.
Finally – To Make BIG Profits Learn To Love RISK!
The reason most traders never make any money is they are so afraid of risk they actually create it. They trade marginal trades, don’t risk enough and dilute their profit potential.
The fact is if you want to trade currencies you need to enjoy risk and be a speculator and confront and conquer risk – If you do you will make a lot of money. On the other hand if you don’t enjoy risk – don’t trade Forex.
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