It does not matter what type of currency trading system you use these 3 simple tips will help you increase your profit potential dramatically. These tips are easy to understand, easy to apply and even better will increase your profits dramatically.
1. Learn the 80 – 20 Rule
The 80 – 20 rule applications in many areas of business and finance and is also known as the Pareto Principle. The basic rule that applies to forex activity is that 80% of the results come from 20% of your trades.
The first thing you should learn from this is cut back on trades.
Most forex traders simply trade too much. They think that if they are in the market all the time they will have more chance of winning.
This assumption is totally false – you do not get forex trading profits from the amount of trades you do you get your reward for being right that's it.
Trading frequency counts for nothing, how often you are right does.
So cut back your trades and only trade the best set ups. I know traders who only trade a few times a year yet make annualized gains of 100% or more.
2. Do not Diversify
This is the buzz word and a way many people will tell you will help you reduce risk. This is not so you can be wrong on 3 trades as well as 1! Do not fall for the theory all diversification does is reduce your profit potential.
If you have a high odds trade why dilute this potential?
If you have courage and confidence your trading system is right trade the trade and back your judgment – which leads me onto the final point
3. Risk More
You have heard it from lots of traders and gurus:
Never risk more than 2% of your account equity on a single trade.
Well, if you are like most traders trading accounts of $ 10,000 or less then that's $ 200.00!
With forex volatility which needs to be taken into account how much are you going to make risking that?
The answer is not much. As you have cut your trading already and are only trading high probability set ups – milk them.
Risk 10 – 20% and get some bang for your buck.
Most traders are so scared of risk that they actually create it by, trading stops so close their guaranteed to get stopped out.
With risk goes reward, that's an investment fact – If you do not risk enough, you will not make enough.
Taking calculated risks is quite different from being rash.
If you believe in your forex trading system and want to make money take a meaningful risk.
If you do not like risk do not trade forex it's as simple as that.
Why are you trading forex to make money – that's it.
As its risky what's the point in aiming for 20% per annual? You can make that with far less risk in property. If you want to trade FX, aim for more and confront risk with the attitude it's not to be scared – it's an opportunity for profit.