You probably heard about 80/20 principle also known as Pareto Principle.
Let’s understand what 80/20 principle and how it is significance in trading.
Pareto principle was originally developed by Italian economist, Vilfredo Pareto in late 1700’s.
This principle proves the small and effective effort produce the majority of your results.
Few Examples:
80% of the revenue comes from your 20% of the customer.
80% of the sale comes from 20% of the sales reps.
80% of the website traffic comes to 20% of the webpages.
You can apply this anything in your life for studying, sports, diet, work & time management, etc.,
How can we apply in trading?
Consider you a day trader, you have average of 22 trading days in a month.
Let’s go in-depth,
80% of 22 days is = 4.4 days. To round off 4 days in a month is a 20%.
Your 80% of the profits will comes from 4 days in the month.