Lotto, Is This The Best CFD Trading Strategy
Making of use of two critical measures of trading performance can dramatically improve your trading results. These two important measurements are the hit rate (winning %) and the risk reward.
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
Most people have bought lotto tickets at some point in their life, however is lotto the way to riches?
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.
But there is a problem with buying Lotto tickets as an investment strategy. It is not the risk reward, but the hit rate. If a winning Lotto ticket requires 6 correct balls out of 40 possibilities, then the odds of winning are 3,838,380 to 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.
Trading Lessons From A Rugby Game
In the Super 14 rugby series in New Zealand the Crusaders has been a dominant team over the last ten years winning 7 of the 10 series.
In 2008 a gambler placed a $100,000 bet on the Crusaders to win a game at odds of just 1.08. This means that if the Crusaders won the gambler would have received a payout of $108,000, making a profit of just $8,000, but if they lost the gambler would lose $100,000. This is a lousy edge ratio with the risk reward ratio of 8 to 100 and a potential big loss for a very small gain.
But the probability of the Crusaders winning the game is very high. For this to be a profitable investment the odds would have to be over 90% that the Crusaders would win the game.
Calculating the probability of a team winning a game is not an easy task, but assuming the odds were 95%, then the gambler would win 19 times $8,000 and lose $100,000 just once. It could be that our gambler had a profitable strategy despite the lousy risk reward.
A successful CFD trader will find a CFD trading strategy that skews the odds in their favour and then implement that strategy to generate profits. - 23212
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
Most people have bought lotto tickets at some point in their life, however is lotto the way to riches?
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.
But there is a problem with buying Lotto tickets as an investment strategy. It is not the risk reward, but the hit rate. If a winning Lotto ticket requires 6 correct balls out of 40 possibilities, then the odds of winning are 3,838,380 to 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.
Trading Lessons From A Rugby Game
In the Super 14 rugby series in New Zealand the Crusaders has been a dominant team over the last ten years winning 7 of the 10 series.
In 2008 a gambler placed a $100,000 bet on the Crusaders to win a game at odds of just 1.08. This means that if the Crusaders won the gambler would have received a payout of $108,000, making a profit of just $8,000, but if they lost the gambler would lose $100,000. This is a lousy edge ratio with the risk reward ratio of 8 to 100 and a potential big loss for a very small gain.
But the probability of the Crusaders winning the game is very high. For this to be a profitable investment the odds would have to be over 90% that the Crusaders would win the game.
Calculating the probability of a team winning a game is not an easy task, but assuming the odds were 95%, then the gambler would win 19 times $8,000 and lose $100,000 just once. It could be that our gambler had a profitable strategy despite the lousy risk reward.
A successful CFD trader will find a CFD trading strategy that skews the odds in their favour and then implement that strategy to generate profits. - 23212
About the Author:
Jeff Cartridge is a private trader and author that lives in New Zealand and created the website LearnCFDs.com Find the Best CFD Trading Books
posted by X - Men @ 2:59 AM
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