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  1. Feb 21, 2017 · Odds favor long terms investors (53% chance of making a profit), investors with long term horizon should consider investing in stock markets. Average investor should look to invest in the Index using a low-cost Index fund. Direct equity investors should understand that the odds are stacked against them.

  2. What Are the Odds of Scoring a Winning Trade? › articles › financial-theory
    • Understanding The Coin Toss
    • Long-Term Results
    • How Profitable Traders Make Money
    • The Bottom Line

    Let's assume that at a given moment in time, a stock could just as easily move up as it could move down (even in a range, stocks move up and down). Thus, our probability of making a profit on a (short or long) position is 50%, which is the same as a coin flip. Although most investors would not likely initiate random short-term trades, we will start with this scenario. If we have an equal probability of making a quick profit, does a run of profits or losses signal what future outcomes will be? No! Not on random trades. Each result still has a 50% probability, no matter what outcomes came prior. The same is true of a coin toss—if it lands heads ten consecutive times, the probability of it landing on tails on the next toss is still 50%. A consecutive streak or a run can happen in random 50/50 events. A run refers to a number of identical outcomes that occur in a row. Here is a table displaying the probabilities of such a run; in other words, the odds of flipping a given number of heads...

    The above example gave a short-term trade example based on a 50% chance of being right or wrong. But does this apply to the long term? Very much so. The reason is that even though a trader may only take long-term positions, they will be doing fewer trades. Thus, it will take longer to attain data from enough trades to see if simple luck is involved or if it was skill. A short-term trader may make 30 trades a week and show a profit every month for two years. Has this trader overcome the odds with real skill? It would seem so, as the odds of having a run of 24 profitable months are extremely rare unless the odds have shifted more in the trader's favor somehow. What about a long-term investor who has made three trades over the last two years that have been profitable? Is this trader exhibiting skill? Not necessarily. Currently, this trader has a run of three going, and that is not difficult to accomplish even from totally random results. The lesson here is that skill is not just reflec...

    Of course, people do make money in the markets, and it's not just because they have had a good run. How do we get the odds in our favor? The profitable results come from two concepts. The first is based on what was discussed above—being profitable in all time frames, or at least winning more in certain periods than is lost in others. The second concept is the fact that trends exist in the markets, and this no longer makes the markets a 50/50 gamble as in our coin toss example. Stock prices tend to run in a certain direction over periods of time, and they have done this repeatedly over market history. For those of you who understand statistics, this proves that runs (trends) in stocks occur. Thus we end up with a probability curve that is not normal (remember that bell curveyour teachers always talked about) but is skewed and commonly referred to as a curve with a fat tail (see the chart below). This means that traders can be profitable on a consistent basis if they use trends, even...

    Why is the 50% probability example useful? The reason is that the lessons are still valid. A trader should not increase position size or take on more risk (relative to position size) because of a string of wins, which should not be assumed to occur as a result of skill. It also means that a trader should not decrease position sizeafter having a long, profitable run. New traders can take solacein the fact that their researched trading system may not be faulty, but rather the method is experiencing a random run of bad results (or it may still need some refining). It also should put pressure on those who have been profitable to monitor their strategies continually, so they remain profitable over time. This approach can also aid investors when they are analyzing mutual funds or hedge funds. Trading results are often published that show spectacular returns; knowing a little more about statistics can help us gauge whether those returns are likely to continue or if the returns just happene...

  3. Stock Market Strategies – Stack the odds in your favor › stock-market-strategy › stock

    Jul 26, 2010 · Going Long on a Stock, is the strategy that most people are familiar with, and simply means that you are Buying a Stock with the view that the stock will rise in value & eventually sold at a higher price. Stocks have a 1:1 leverage, so for every dollar the share price rises so does each of your shares eg. 100 x ABC shares @ $20 rise to $21 = $1 ...

  4. Stock Market Odds | How To Bet On The Stock Market ... › stock-market

    London Market Betting Odds, LSE - The London Stock Exchange is the UK's version of Wall Street. Though it is much smaller than the New York financial market, UK gamblers have made betting on the LSE big business, thanks to a culture of gambling countries in the United Kingdom.

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  6. What are the odds of making lots of money in stocks? - Quora › What-are-the-odds-of-making-lots

    Warren Buffett has done a pretty good job making money from stocks. Here are 4 things he looks at when buying a business: Invest in a company you fully understand, make sure they have an honest management team in place with a track record of succe...

  7. 6 Investment Mistakes To Avoid In A Frothy Market | Seeking Alpha › article › 4373998-6-inves

    Sep 14, 2020 · Thomas Phelps, author of the book 100 to 1 in the Stock Market has provided valuable lessons to better understand the power of compounding. A 100-bagger is a stock that returns 100 times your ...

  8. How to Predict Where the Market Will Open › articles › active-trading

    Apr 13, 2020 · Unlike the stock market, futures markets rarely close. Futures contracts trade based on the values of the stock market benchmark indexes they represent. S&P 500 futures trade based on the value of ...

  9. Who's Ready for a Stock Market Crash? 5 Reasons a Big Drop ... › investing › 2021/06/12

    Jun 12, 2021 · 5. Margin debt is skyrocketing. Perhaps the most terrifying fact of all is the current level of margin debt. Margin is the debt that brokerage customers take on to buy equities. Consider it a way ...

  10. Should You Go To Cash Until The Market Recovers Or Ride It Out? › sites › kristinmckenna

    Mar 11, 2020 · According to Dimensional, in the years following a 10% correction or worse, the stock market has still been up on average (and significantly so) in the one, three, and five years to follow. Fama ...

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