How To Exploit The 80/20 Rule In Trading & Investing 3
While “cut your losses quickly and let your winners run” seems like simple advice, it is psychologically and emotionally difficult to do so.
How To Exploit The 80/20 Rule In Trading & Investing 2
Experienced traders will recognize that the dynamic described in Part 1 is expressed in the trading adage “Cut your losses quickly and let your winners run”.
How To Exploit The 80/20 Rule In Trading & Investing 1
Paretian effects dominate financial markets. Understanding this can bring about a paradigm shift that leads to a more profitable approach to trading.
How Does The 80/20 Rule Apply To Investing? 4
Since markets are not normally distributed, we must understand how they really function. How does Pareto affect the way we think of and trade the markets?
How Does The 80/20 Rule Apply To Investing? 3
The most important point to understand about markets is that outcomes aren’t normally distributed. Instead, they follow a Pareto distribution – the 80/20 Rule.
How Does The 80/20 Rule Apply To Investing? 2
The expected value thought process is subjective and vulnerable to cognitive bias, and every trader will come up with different numbers and scenarios.
How Does The 80/20 Rule Apply To Investing? 1
Most people understand that few outcomes in markets are certain, which means that they are rarely binary. How does this affect the way we think about markets?
