Smith Brown

Risk Reward Ration should be good enough

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Understanding the relationship between two important ratios is the key to building winning CFD Trading Strategies which are contracts of difference trading strategies. The two key ratios are the risk reward ratio and the hit rate.

Contracts for Difference (CFDs) versus Lotto:

Almost everyone has bought the lotto tickets at least once in their lifetime; however lotto is one of the ways to the riches? The good thing about lotto is that its very less risky its ticket costs ten to twelve dollars only and the rewards are potentially high. First prize winner get about ten to twelve million dollars. If you consider the reward to risk ration its about ten to twelve million dollars to ten to twelve dollars. Suppose you have bought lotto tickets for ten dollars only and you get the first prize which is ten million dollars then the reward to risk ration is only one million dollars to one dollar.

One can look out for number of such examples on CFD Webinars. But there are hardly few investments which offer such a kind of risk rewards. But there is a great problem in buying lotto tickets as far as investment strategies are concerned. Buying lotto tickets is not basically risk rewards but the hit rate. For instance if a victorious lotto ticket requires six accurate balls out of forty possibilities then the odds for being victorious are 3,838,380 to 1.

Contracts for Difference (CFDs) versus Rugby:

Since last ten years the Crusaders have been the most dominating team of the Super fourteen rugby series. They have won seven out of ten series. In the year 2008 most of the gamblers had invested about $ 100,000 to win the series of 1.08. This clearly means that the gamblers would win $ 108,000 if Crusaders wins but they will be losing $ 100,000 if the Crusaders could not make it to the victory. Cut one should look for the CFD Trading Tips also. This is a miserable edge ratio having risk reward ratio of 8 and the loss of about 100 which is really very big. But still the probability of wining game by the Crusaders is quiet high.

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