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 we were to play Lotto 3,838,380 times then we would expect to win once and lose 3,838,379 times. This means we would win $10 million once and lose $38,383,790, overall losing $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 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.
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.
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. - 23229
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 we were to play Lotto 3,838,380 times then we would expect to win once and lose 3,838,379 times. This means we would win $10 million once and lose $38,383,790, overall losing $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 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.
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.
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. - 23229
About the Author:
Jeff Cartridge is the author of Supercharge Your Trading with CFDs and created the website LearnCFDs.com Find the Best CFD Trading Books
posted by X - Men @ 2:46 AM
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