Profitable CFD Trading Strategies
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.
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.
Winning Lotto is more about luck than probability as you may win before you buy you 3,838,380 ticket. But when it comes to building a profitable trading strategy it is not about luck it is about taking advantage of an opportunity that has a profitable edge.
Trading Lessons From A Rugby Game
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.
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.
The odds are unknown, but assuming they were 95% then the gambler would win 19 out of 20 times. This means he would win $8,000 x 19 - $100,000 x 1. Overall he expects to win $52,000 from this strategy. So despite the risk reward being very poor it is possible that this is a winning strategy.
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. - 23305
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.
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.
Winning Lotto is more about luck than probability as you may win before you buy you 3,838,380 ticket. But when it comes to building a profitable trading strategy it is not about luck it is about taking advantage of an opportunity that has a profitable edge.
Trading Lessons From A Rugby Game
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.
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.
The odds are unknown, but assuming they were 95% then the gambler would win 19 out of 20 times. This means he would win $8,000 x 19 - $100,000 x 1. Overall he expects to win $52,000 from this strategy. So despite the risk reward being very poor it is possible that this is a winning strategy.
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. - 23305
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 Mr. Forex at
3:05 AM
1 Comments:
Very nice tips and CFD trading strategies shared on this blog. I found all tips very helpful. Thanks for sharing
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January 26, 2018 at 9:55 PM
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