I have argued for a long time that trading stocks and gambling are very similar. That does not mean that you should stop trading stocks, it only means that you need to understand something regarding probability of winning when you trade stocks. You need to learn how to put the odds in your favor when investing in the stock market ฮอลิเดย์พาเลซ.
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 nearly two decades and without presenting an argument here I will state simply that given that market movement is predominantly random, no practical trading system can be expected to do better than 60%. If somebody brags that they have a trading system or that they can predict market behavior with 90% accuracy, I assume they are either idiots, charlatans or both.
So we work with 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 going to compare stock trading with casino gambling 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. It would appear that if you put $10 on one number that your odds 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 slots, both green, 0 and 00. When the ball lands on one of those slots the house gets everything.
How does this change the odds? What this means is 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.