{"id":25798,"date":"2011-12-06T11:33:12","date_gmt":"2011-12-06T16:33:12","guid":{"rendered":"http:\/\/countingpips.com\/fx\/?p=25798"},"modified":"2011-12-06T11:33:12","modified_gmt":"2011-12-06T16:33:12","slug":"why-good-traders-make-90-of-their-profits-from-10-of-their-trades","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/fx\/2011\/12\/06\/why-good-traders-make-90-of-their-profits-from-10-of-their-trades\/","title":{"rendered":"Why Good Traders Make 90% of Their Profits from 10% of Their Trades"},"content":{"rendered":"

Written by Sara Nunnally, Editor, Inside Investing Daily, insideinvestingdaily.com<\/strong><\/span><\/a><\/h4>\n

If you’re looking for that single investment that is going to create the majority of your wealth… here it is.<\/strong><\/em><\/p>\n

Jobs data on Friday added a nice pop to U.S. markets. According to the BLS, the unemployment rate dropped to 8.6% as the economy added 120,000 jobs in November.<\/p>\n

But don’t uncork the champagne just yet…<\/p>\n

We know this number is manipulated to put the best face on the picture. Not included in this number is the fact that 315,000 people stopped<\/em><\/strong> looking for a job last month. Also, retailers added the most jobs of any sector at 50,000.<\/p>\n

Can you think of any reason why they would lead the charge?<\/p>\n

Seasonal shopping, anyone?<\/p>\n

Now, a job’s a job, especially to someone who’s been out of work for a while with a family to take care of…<\/p>\n

But investors need to watch for a possible drop-off in January, after the holidays.<\/p>\n

Add to that consumers are expected to spend less this holiday season, and you’ve got a nice little setup to short some retailer come January. Bankrate.com’s Financial Security Index poll found that 42% of those surveyed said they were planning on spending less this year.<\/p>\n

Only 10% said they were planning on spending more.<\/p>\n

This index survey also asked folks how secure they felt in their jobs. Only 13% said they felt more secure than last year — the second-lowest level of the year.<\/p>\n

All this is not very soothing to investors…<\/p>\n

But there’s a lot of opportunity in all this uncertainty and volatility.<\/p>\n

It has to do with being able to control risk and attack profitable investments head-on. Some of the best traders in the world make 90% of their profits from 10% of their trades.<\/p>\n

This is the 90\/10 Phenomenon.<\/p>\n

What that means is two things: That these guys are making big bets when it counts, and they’re limiting risk by spreading out their investments.<\/p>\n

Instead of betting the house on a hunch, the best traders have their fingers in a lot of small pots. This doesn’t necessarily mean “diversification.” These guys do their research to find the best possible investments wherever they are.<\/p>\n

They’re waiting for their research to pan out.<\/p>\n

When circumstances start to turn their way in one particular trade, they ratchet up their investment… incrementally increasing their exposure while not tipping the scale with undue risk.<\/p>\n

That’s how the best traders get big paydays… like George Soros’ billion-dollar win against the British pound in 1992.<\/p>\n

When volatility increases in the market, these traders start cleaning up.<\/p>\n

This could be one of the best times (outside of the dismal lows back in 2008-2009) to start building your fortune. More millionaires were created during the Great Depression than any other time in our history.<\/p>\n

Let’s take a look at two “small pots” with big potential…<\/p>\n

Global Infrastructure<\/h3>\n

I talked about this briefly at our Money Crisis Survival Summit in September. India is expected to surpass China in population by 2025. And by 2050, 75% of the world’s population will live in urban areas.<\/p>\n

That means huge building projects — water, sewer, electricity, airports, road and bridges… not to mention energy corridors to pump oil and natural gas to refineries and power station. Demand for industrial commodities is going to soar.<\/p>\n

We’re talking about copper, steel, concrete and all manner of other building materials.<\/p>\n

We could see pipelines and power stations go up at an alarmingly fast rate.<\/p>\n

I really like this industry — and the building and project management companies might fare better than the commodities themselves.<\/p>\n

Companies with projects in growing markets (and growing populations) like India, China and Latin America will do well.<\/p>\n

And if they’ve been hit by the slowdown in Europe and the U.S. valuations might be very attractive right now.<\/p>\n

Currencies<\/h3>\n

This investment category shouldn’t scare you. It should get you drooling… We’re seeing the possible death of a major currency in real time! The euro is like a cornered rabbit right now. There’s no good way to flee, and it could end up on somebody’s dinner plate.<\/p>\n

For traditional investors, currencies can seem pretty exotic, but access to this market — one of the biggest in the world with trillions of dollars’ worth traded every day — is getting just as easy as investing in stocks.<\/p>\n

There are a number of exchange-traded funds that will give you exposure to a variety of currencies.<\/p>\n

The one thing you must remember, though, is that every currency play is two-sided. That means the currency is only valued in comparison to something else. For the exchange-traded funds, that “something else” is the U.S. dollar.<\/p>\n

You will have to take this factor into account when investing in currencies. For as bad as the euro’s prospects are, the CurrencyShares Euro Trust (FXE:NYSE)<\/strong> ended last week higher…<\/p>\n

Because of the cheap U.S. dollar.<\/p>\n

That said, currencies will be a huge area for investors to clean up. It was with currencies that George Soros made his billion-dollar trade. He bet big that the British pound sterling was going to tank, and he was right.<\/p>\n

These two “small pots” are very interesting areas with a lot of potential for wealth-builders to start dabbling in. But just remember, the best traders aren’t arbitrary. They do their homework, start small, have a strong working plan and invest accordingly.<\/p>\n

And they’re ready to move once the gears get going.<\/p>\n

Editor’s Note:<\/strong> The idea that the world’s best traders make 90% of their profits in just 10% of their trades is part of what Sara calls the Trader’s Key. It is an idea she discussed in great length in last week’s emergency teleconference. If you haven’t listened to it yet… it’s FREE.<\/a><\/p>\n

Written by Sara Nunnally, Editor, Inside Investing Daily, insideinvestingdaily.com<\/strong><\/a><\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

Written by Sara Nunnally, Editor, Inside Investing Daily, insideinvestingdaily.com If you’re looking for that single investment that is going to create the majority of your wealth… here it is. Jobs data on Friday added a nice pop to U.S. markets. According to the BLS, the unemployment rate dropped to 8.6% as the economy added 120,000 … <\/p>\n

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