# The real odds of success in any game of chance

- The zero on a roulette wheel means the odds of a win on red are not 50/50
- History shows that markets rally or move sideways 53.1% of the time
- Markets can throw a sideways day whereby long and short day traders can fail
- Beware of distribution data that gives the house an edge

By fxtime*

Throughout my trading ''career'', I have come across many whom believe that trading is just a pure gambler's heaven. And that the markets are a random process of buyers and sellers seeking their own goals, irrespective of market fundamentals.

a game in which the house always wins. Photo: iStock

The roulette table permits a selection of trades; sorry I mean "games" to us traders. We can opt for all or nothing by wagering on a colour, that is, red or black. But we encounter a problem similar to all traders. We can go long or short just as the casino players can have red or green, but the odds most definitely aren't 50/50, because of the existence of that green number. That is, there are 65 slots containing numbers 0 to 64 and only 32 of the 65 numbers on a European table are red which is slightly less than 50% odds.

The markets can also throw a sideways day whereby long and short day traders can fail. In fact history over any timeframe will show that for a magical 53.1% of the time, the markets rally or move sideways, and thus 46.9% of the time the are short. So if you are randomly trading red or black in your positions, the odds are in favour of keeping long positions, as you should make your casino account grow, as the worst case is a sideways day which is neutral to you.

Life is a lottery

punters influenced by birthdates and other preferences. Photo: iStock

As for choosing only high or low numbers; most people spread their numbers, based on birthdays and age, for example. So all that would occur with high and low number selections is that any winnings would be greater, as fewer people choose these numbers. But the odds of these number selections winning are lower, because distribution data has a sting in the tail which gives the house an edge. Again we cannot rely on frequency for making profitable trading transactions or consistent revenue with lotteries or the markets in general.

Trading platforms with high leverage are no different — they can slow fills as there is always a risk officer or programme that can assess the implication of a trade being opened against the market makers/trade platforms overall values at risk and can decline the order for requote etc. Usually before you have your order confirmed, there is an algorithm embedded into the trade platform that will make the risk assessment in milliseconds before permitting/declining your trade request.

The Bernoulli Law shows that games of chance have a distribution curve like anything else and that in the old 49 numbers draw of the UK, you could add all the permutations of a ticket and determine where the most frequent number of six-drawn numbered balls totals occurs. Or to put it another way, what is the minimum and maximum success rate for a total of six balls randomly chosen in the UK lottery.

The number value of 177 and above proved to be the most successful range. Professional syndicates quickly determined that there were more permutations of a win with 6 balls numbered 1 to 49 having an aggregate sum value of 177+ is where the maximum permutations available for a win. Probability then moves into the syndicates favour.

Roulette also has a similar issue where an aggregate score will rapidly show where the greatest success rate strategies occur. Even better with roulette as opposed to lotteries is that you can trade a roulette table much the same way as you would with option trades eg strangles/straddles etc. You look to gain the house margin for the consistent profit stream.

I am not trying to build a case for adding to a loss making trade in the hope that your revised average break even will be achieved as that is folly but we can scale winning trades very rapidly.

"A simple three-day trading range and a central pivot point" sounds interesting for me.