Understanding the relationship between two important ratios is the key to building winning CFD trading strategies. The two key ratios are the risk reward ratio and the hit rate.
Lotto versus Contracts for Difference (CFDs)
Most people have bought lotto tickets at some point in their life, however is lotto the way to riches? The risk is very low, let's say for a ticket, while the reward is potentially huge, with first prize being many millions of dollars, say million. The risk reward ratio of this investment is exceptional at 1 million to 1. There are very few investments that deliver this kind of risk reward. 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.
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 million once and lose ,383,790 times. Overall, buying Lotto tickets is not a profitable CFD trading strategy. Luck will favour some people in Lotto, but successful CFD trading is not about luck, it is about exploiting profitable opportunities.
Rugby versus Contracts for Difference (CFDs)
In the Super 14 rugby series the Crusaders has been a dominant team over the last ten years winning 7 of the 10 series. In 2008 a gambler placed a 0,000 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 8,000, making a profit of just ,000, but if they lost the gambler would lose 0,000. 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. If the odds were 95% then the gambler would lose only once out of 20 games so he would make ,000 times 19, 2,000, and lose 0,000 once. 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.
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.
Creating CFD Trading Strategy is not that simple. You should have at least 2years of experience that you can use in creating a better one.
It is a very hard situation when playing the lottery and never won, or keep winning low fund not up to 100 bucks, i have been a victim of such a tough life, the biggest fund i have ever won was 100 bucks, and i have been playing lottery for almost 12 years now, things suddenly change the moment i came across a secret online, a testimony of a spell caster called DR EMU, who help people in any type of lottery numbers, i was not easily convinced, but i decided to give try, now i am a proud lottery winner with the help of DR EMU, i won $1,000.0000.00 and i am making this known to every one out there who have been trying all day to win the lottery, believe me this is the only way to win the lottery.
Contact him via email Emutemple@gmail.com
What's app +2347012841542
Https://emutemple.wordpress.com/