Stock trading and casino gambling are very similar


An expert stock trader can explain how a small investor can gain the "house advantage" by stock trading. I've argued for a long period that stock trading and gambling are extremely similar. That does not necessarily mean that you need to stop stock trading, it only means that you need to understand something regarding possibility of winning whenever you trade options. You need to understand how you can place the odds in your favor when investing in the stock exchange.

We trade a system. It's a excellent system also it consistently returns in more than 100% annual on our investment with time. But just like that may seem as we test our system in numerous markets over a long time involving say about 10,000 trades, we discover that it only wins about 56% of the time.

I've been studying these market statistics for pretty much 2 decades and without presenting a disagreement here' will state simply that given that market movement is predominantly random, no practical trading system should be expected to complete better than 60%. If somebody brags that there is a trading system or that they are able to predict market behavior with 90% accuracy, I suppose they're either idiots, charlatans or both.

Therefore we make use of a system that has about 56% accuracy. In this article I'll show the way a system with 56% accuracy can continue to make a small fortune and get it done with little risk. In order to get this done I will compare trading with casino gambling with one factor: We're The home!

In order to understand the casino side of my argument you need to understand a minimum of one popular casino game, roulette. The roulette table has 36 numbers, half are red and half are black. It appears that if you put USD 10 on one number that your likelihood of losing could be 36:1. However, you could lose often but still break even because eventually the ball will fall on your number and also the house will pay you 36:1 or USD 360. There's a catch. If you examine the roulette table there isn't just 36 numbers, you will find 38 numbers. You will find in fact two extra slots, both green, 0 and 00. Once the ball arrives at one of these slots the home gets everything.

So how exactly does this transformation the chances? This means that the home advantage in the roulette table is 5.3%. What 5.3 percent house advantage means is that the home will make USD 5.30 for every USD 100 bet in the roulette table. Nobody can win at roulette when they keep playing. With time the home ALWAYS wins and they'll win USD 5.30 for every USD 100 bet.

OK, if we're stock trading how can we get to be the house? We get to be the house by trading a system accurately that consistently wins with 56% accuracy. This assumes obviously that our average wins and our average losses are comparable. If our system is 56% accurate our home advantage is 6 % and we'll make USD 6 for every USD 100 bet.

Now that we all know that how can we trade? Well obviously we need to trade a lot. Our earnings are likely to be a portion of how much we bet and thus you want to bet a lot. Presently we're trading 96 markets. We usually get in one day and the next. We probably average around ten trades each day, but each one includes a 56% possibility of winning. We make a nice income with this particular strategy. We're the home.

How do we get to be the house when trading? Well first of ignore brokers, finance experts and stock pickers. You need a good computer-driven trading system that you've tested with lots of markets in a variety of market conditions. You need to see accuracy between 50% and 60%. If it is more than 60% there's a trouble with your data or even the system is really a hoax. You need to diversify across many markets and also you need to trade a lot. And if you do those things you can run your own Wall Street Casino and be rich! After you are the home!

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Note: This article was sent to us by: Louise Morris at 10022011

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