Comments on: The Pareto Principle: 80/20 Rule http://www.chrisperruna.com/2009/02/18/the-pareto-principle-8020-rule/ Sat, 13 Mar 2010 03:09:49 -0800 http://wordpress.org/?v=2.8.2 hourly 1 By: Make the Pareto Principle Work for You! | Making Money Freelance Writing http://www.chrisperruna.com/2009/02/18/the-pareto-principle-8020-rule/comment-page-1/#comment-21025 Make the Pareto Principle Work for You! | Making Money Freelance Writing Thu, 07 May 2009 00:12:50 +0000 http://www.chrisperruna.com/?p=1774#comment-21025 [...] or 2 in 10 stock investments result in real profit. A common mistake in business and other applications of the 80-20 rule is getting caught up in the numbers and summation to 100% of the rule. Instead, take a step [...] [...] or 2 in 10 stock investments result in real profit. A common mistake in business and other applications of the 80-20 rule is getting caught up in the numbers and summation to 100% of the rule. Instead, take a step [...]

]]> By: Chris http://www.chrisperruna.com/2009/02/18/the-pareto-principle-8020-rule/comment-page-1/#comment-20829 Chris Tue, 07 Apr 2009 01:22:20 +0000 http://www.chrisperruna.com/?p=1774#comment-20829 Jeff, I am trading in and out of DXO but other than that, just holding my Visa position. I am starting to collect data on stocks showing strength. The NH-NL ratio is showing some up-tick from the brutal beating it has taken recently. A positive shift will peak my interest. Not there yet. Jeff,

I am trading in and out of DXO but other than that, just holding my Visa position. I am starting to collect data on stocks showing strength. The NH-NL ratio is showing some up-tick from the brutal beating it has taken recently. A positive shift will peak my interest. Not there yet.

]]> By: jefff http://www.chrisperruna.com/2009/02/18/the-pareto-principle-8020-rule/comment-page-1/#comment-20781 jefff Sun, 22 Mar 2009 16:30:34 +0000 http://www.chrisperruna.com/?p=1774#comment-20781 Chris, Longtime reader here. Are you just NOT trading this market ? best, jeff Chris,

Longtime reader here. Are you just NOT trading this market ?

best,

jeff

]]> By: William Bakhos’s Blog » Blog Archive » How to pack a 90 minute workout in 18 minutes http://www.chrisperruna.com/2009/02/18/the-pareto-principle-8020-rule/comment-page-1/#comment-20695 William Bakhos’s Blog » Blog Archive » How to pack a 90 minute workout in 18 minutes Sun, 01 Mar 2009 12:04:17 +0000 http://www.chrisperruna.com/?p=1774#comment-20695 [...] the reasoning behind it until  I discovered the 80:20 principle. Officially known as the Pareto Principle, the 80:20 principle states that roughly 80% of the effect is based on 20% of the cause. So for [...] [...] the reasoning behind it until  I discovered the 80:20 principle. Officially known as the Pareto Principle, the 80:20 principle states that roughly 80% of the effect is based on 20% of the cause. So for [...]

]]> By: Brian http://www.chrisperruna.com/2009/02/18/the-pareto-principle-8020-rule/comment-page-1/#comment-20687 Brian Sat, 21 Feb 2009 00:29:18 +0000 http://www.chrisperruna.com/?p=1774#comment-20687 Chris Great article and extremely important for traders to understand. It is the reality of the 80-20 law that motivates my discipline for money management and stop loss executions. I am about a 300 hitter but historically over 90% of my profits come from 15% to 20% of my trades. So I have to be ruthless in executing the stop loss transactions. I believe the power of this "law of the vital few" comes from understanding that it is a law of nature, like gravity or the ocean tides. It isn't a rule that can be changed or ignored. It will effect you whether you are aware of it or not. The best approach as you point out is to manage your trading and your life to take advantage of it. Too bad we can't have a stop loss rule to protect us from politicians. Your illustration that 80% of the loot is taken by 20% of the criminals suggests to me that 80% of the wasteful burden of government comes from 20% of the politicians. We need an automatic way to remove them from office. But its difficult to get agreement on an appropriate stop loss. Perhaps better "money management" would work. Just limit each government program to no more than 1% of GDP and the heat in the portfolio of government programs to no more then 10%. Chris

Great article and extremely important for traders to understand. It is the reality of the 80-20 law that motivates my discipline for money management and stop loss executions. I am about a 300 hitter but historically over 90% of my profits come from 15% to 20% of my trades. So I have to be ruthless in executing the stop loss transactions.

I believe the power of this “law of the vital few” comes from understanding that it is a law of nature, like gravity or the ocean tides. It isn’t a rule that can be changed or ignored. It will effect you whether you are aware of it or not. The best approach as you point out is to manage your trading and your life to take advantage of it.

Too bad we can’t have a stop loss rule to protect us from politicians. Your illustration that 80% of the loot is taken by 20% of the criminals suggests to me that 80% of the wasteful burden of government comes from 20% of the politicians. We need an automatic way to remove them from office. But its difficult to get agreement on an appropriate stop loss.

Perhaps better “money management” would work. Just limit each government program to no more than 1% of GDP and the heat in the portfolio of government programs to no more then 10%.

]]> By: reed http://www.chrisperruna.com/2009/02/18/the-pareto-principle-8020-rule/comment-page-1/#comment-20686 reed Fri, 20 Feb 2009 02:43:38 +0000 http://www.chrisperruna.com/?p=1774#comment-20686 gee, thought conservative diversification would give across the board gains over time: i.e. winners always shifting to different asset classes. thus allocation across classes, not specific investment within a class makes the most gains. think some nobel prize winner proved this one. otherwise the pareto principle(note: not the pareto optimality principle)means a rational investor should just go to vegas and try for the big payoff. gee, thought conservative diversification would give across the board gains over time: i.e. winners always shifting to different asset classes. thus allocation across classes, not specific investment within a class makes the most gains. think some nobel prize winner proved this one. otherwise the pareto principle(note: not the pareto optimality principle)means a rational investor should just go to vegas and try for the big payoff.

]]> By: Chris http://www.chrisperruna.com/2009/02/18/the-pareto-principle-8020-rule/comment-page-1/#comment-20682 Chris Thu, 19 Feb 2009 00:32:15 +0000 http://www.chrisperruna.com/?p=1774#comment-20682 Funny thing - The 80/20 book above follows the principle. A good chunk of the book (say 70-80%) is repeat material or useless. Funny thing – The 80/20 book above follows the principle. A good chunk of the book (say 70-80%) is repeat material or useless.

]]>