Lotto, Is This The Best CFD Trading Strategy
The two critical numbers to know when you are trading is the risk reward ratio and the winning percentage or hit rate. Understanding these numbers will go a long way to improving your trading.
The risk reward can be calculated by averaging all the wins and dividing by an average of all the losses. The risk reward clearly displays how large your profits are when compared to your losses. The hit rate is simply how often you win and is a count of the winning trades divided by a count of all the trades.
Lotto versus CFDs
Judging by the number of people that play lotto this is the way to generate wealth, but is it really?
Putting at risk just $10, you stand the chance to make $10 million when playing Lotto. This is excellent odds with your wins 1 million times the size of your losses giving a risk reward of $1 million to 1. This is an exceptional number and unlikely to be repeated anywhere in the investment world.
However if it was that easy we would have all won lotto. This is not the case and while the risk reward is exceptional, the hit rate is lousy. Assuming that the lotto draw requires 6 balls out of 40 to win then the chance of buying the winning ticket are 3,838,380:1.
What this means from 3,838,380 games of lotto you could be expected to win $10 million only once and lose the remaining 3,838,379 times. The cost of winning $10 million would be $38,383,790, so your net result is a loss of $28,383,790.
So buying Lotto tickets is not going to make money based on the averages. This does not mean that you will necessarily win on the last ticket that you buy. You may be lucky and win on your first, twentieth, or two thousandth ticket, but successful trading is not about luck. Find a profitable opportunity and exploit that advantage.
Rugby Versus CFDs
The Crusaders have dominated the Super 14 rugby series in New Zealand in the last 10 years as they won 7 years out of the last ten.
A large bet of $100,000 was made that the Crusaders would win a particular game. The payoff if the Crusaders won was $108,000 so the gambler would receive a profit of just $8,000. With a downside of $100,000 the risk reward is very poor at 8:100 or 0.08.
Despite the lousy risk reward the probability of success is very high. If the probability was greater than 90% that the Crusaders would win then this could be the basis of a profitable strategy.
If the odds were 95% then the gambler would lose only once out of 20 games so he would make $8,000 times 19, $152,000, and lose $100,000 once. His net gain is $52,000. As an investment even though the risk reward is lousy, this could be a profitable strategy if the hit rate is high enough to justify the investment.
To trade CFDs successfully it is vitally important to have a strategy that overall you expect to win because the combination of risk reward and hit rate are in your favour. - 23208
The risk reward can be calculated by averaging all the wins and dividing by an average of all the losses. The risk reward clearly displays how large your profits are when compared to your losses. The hit rate is simply how often you win and is a count of the winning trades divided by a count of all the trades.
Lotto versus CFDs
Judging by the number of people that play lotto this is the way to generate wealth, but is it really?
Putting at risk just $10, you stand the chance to make $10 million when playing Lotto. This is excellent odds with your wins 1 million times the size of your losses giving a risk reward of $1 million to 1. This is an exceptional number and unlikely to be repeated anywhere in the investment world.
However if it was that easy we would have all won lotto. This is not the case and while the risk reward is exceptional, the hit rate is lousy. Assuming that the lotto draw requires 6 balls out of 40 to win then the chance of buying the winning ticket are 3,838,380:1.
What this means from 3,838,380 games of lotto you could be expected to win $10 million only once and lose the remaining 3,838,379 times. The cost of winning $10 million would be $38,383,790, so your net result is a loss of $28,383,790.
So buying Lotto tickets is not going to make money based on the averages. This does not mean that you will necessarily win on the last ticket that you buy. You may be lucky and win on your first, twentieth, or two thousandth ticket, but successful trading is not about luck. Find a profitable opportunity and exploit that advantage.
Rugby Versus CFDs
The Crusaders have dominated the Super 14 rugby series in New Zealand in the last 10 years as they won 7 years out of the last ten.
A large bet of $100,000 was made that the Crusaders would win a particular game. The payoff if the Crusaders won was $108,000 so the gambler would receive a profit of just $8,000. With a downside of $100,000 the risk reward is very poor at 8:100 or 0.08.
Despite the lousy risk reward the probability of success is very high. If the probability was greater than 90% that the Crusaders would win then this could be the basis of a profitable strategy.
If the odds were 95% then the gambler would lose only once out of 20 games so he would make $8,000 times 19, $152,000, and lose $100,000 once. His net gain is $52,000. As an investment even though the risk reward is lousy, this could be a profitable strategy if the hit rate is high enough to justify the investment.
To trade CFDs successfully it is vitally important to have a strategy that overall you expect to win because the combination of risk reward and hit rate are in your favour. - 23208
About the Author:
Jeff Cartridge has been trading CFDs since they were first launched in Australia in 2002 and created the website LearnCFDs.com Find the Best CFD Trading Books
posted by X - Men @ 2:36 AM
0 Comments
0 Comments:
Post a Comment
Subscribe to Post Comments [Atom]
<< Home