I have put forward the proposition for a long time that trading stocks and gaming are very similar. That will not mean that you should stop trading stocks, it only dominoqq means that you need to understand something regarding probability of winning when you trade stocks. You need to learn how to put the odds for your benefit when investing in the wall street game.
We trade a system. It is a very good system and it consistently returns in excess of 100% annual on our investment over time. But as good as that may sound if we test our system in numerous markets over many years involving say about 10, 000 trades, we find that it only wins about 56% of the time.
I have been studying these market statistics for almost two full decades and without presenting an argument here I will state simply that given that market movement is predominantly random, no practical trading system to expect to do better than 60%. If somebody brags they own a trading system or that they can predict market behavior with 90% accuracy, I assume they are either fools, charlatans or both.
So we possess a system that has about 56% accuracy. In this article I will show how a system with 56% accuracy can still make tons of money and do it with little risk. In order to do this I am about to compare trading and investing with casino gaming with one significant difference: WE ARE THE HOUSE!
In order to understand the casino side of my argument you have to understand at least one popular casino game, roulette. The roulette table has 36 numbers, half are red and half are black. Apparently if you put $10 on one number that your probability of losing would be 36: 1. But you could lose many times and still break even because eventually the ball will fall on your number and the house will pay you 36: 1 or $360.
HOWEVER, there is a catch. If you examine the roulette table there is not just 36 numbers, there are 38 numbers. There are in fact two extra pai gow poker, both green, 0 and 00. When the ball gets on one of those pai gow poker the house gets everything.
How does this change the odds? This implies that the house advantage at the roulette table is 5. 3%. What 5. 3 percent house advantage means is that the house will make $5. 30 for every $100 bet at the roulette table.
No individual can win at roulette if they keep playing. Over time the house ALWAYS wins and they’re going to win $5. 30 for every $100 bet.
OK, now if we are trading stocks how do we end up being the house? We end up being the house by trading a system accurately that consistently wins with 56% accuracy. This thinks of course which our average wins and our average losses are about the same. If our system is 56% accurate our house advantage is 6 % and we will make $6 for every $100 bet.
Now that we know that how should we trade? Well obviously we need to trade a lot. Our profits are going to be a share of how much we bet and so we want to bet a lot. Presently we are trading ninety-six markets. We usually get in one day and out the next. We probably average around ten trades a day, but each one has a 56% chance of winning. We make good money with this strategy. We are the house.
I will give you another extreme example from my trading past. Over a two year period I made over 5 million dollars profits, trading a free account approximately 2 million. I made over 11, 000 trades, the average trade was only $385, but I pushed nearly TWO BILLION DOLLARS through the wall street game with all that trading. You can make a lot of money with a low house advantage when you are taking a percentage of two billion dollars!
So how do you end up being the house when trading and investing? Well first of all forget about brokers, financial experts and stock pickers. You might need a solid computer-driven trading system that you have tested with many markets in many different market conditions. You want to see accuracy between 50% and 60%. If its more than 60% there is a problem with your data or the device is a scam. You need to diversify across many markets and you need to trade a lot.
And if you do all those things you can run your own Wall Street Casino and grow rich! You are now the house!