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.
Risk reward is calculated by dividing the average win by the average loss. The hit rate is the number of winning trades divided by the total trades. So the hit rate is how often you are right and the risk reward is how much you win when you are right relative to how much you lose when you are wrong.
How Does Lotto Compare To CFDs?
Do you really believe that lotto is the way to make money? The behaviour of millions of people would suggest that it is.
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 it is not how much you win that is important when playing lotto it is how often do you win. An awesome risk reward is coupled with an awful hit rate. To win lotto if you require 6 from 40 balls then your probability of success is 1:3,838,380.
If you bought 3,838,380 tickets on average one ticket would win and the rest (3,838,379) would lose. This means on average you would have to spend $38,383,790 to win $10 million. Overall playing Lotto would cost you $28,383,790.
Overall, buying Lotto tickets is not a profitable strategy. Luck will favour some people in Lotto, but successful CFD trading is not about luck, it is about exploiting profitable opportunities.
Rugby Versus CFDs
The Crusaders have consistently won the Super 14 rugby competition in NZ managing to secure 7 wins over the last ten years.
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.
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. - 23222
Risk reward is calculated by dividing the average win by the average loss. The hit rate is the number of winning trades divided by the total trades. So the hit rate is how often you are right and the risk reward is how much you win when you are right relative to how much you lose when you are wrong.
How Does Lotto Compare To CFDs?
Do you really believe that lotto is the way to make money? The behaviour of millions of people would suggest that it is.
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 it is not how much you win that is important when playing lotto it is how often do you win. An awesome risk reward is coupled with an awful hit rate. To win lotto if you require 6 from 40 balls then your probability of success is 1:3,838,380.
If you bought 3,838,380 tickets on average one ticket would win and the rest (3,838,379) would lose. This means on average you would have to spend $38,383,790 to win $10 million. Overall playing Lotto would cost you $28,383,790.
Overall, buying Lotto tickets is not a profitable strategy. Luck will favour some people in Lotto, but successful CFD trading is not about luck, it is about exploiting profitable opportunities.
Rugby Versus CFDs
The Crusaders have consistently won the Super 14 rugby competition in NZ managing to secure 7 wins over the last ten years.
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.
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. - 23222
About the Author:
Jeff Cartridge has been trading CFDs since they were first launched in Australia in 2002 and created the website LearnCFDs.com Discover the Truth Behind CFD Brokers
posted by X - Men @ 2:48 AM
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