I'd like to question the premise that long term average result is break-even or 50% win, before commission. This concept is mentioned again in Peter's recent blog "Little and often".
With minimum one tick difference between back and lay prices in any market my thinking is the average result will be a one tick loss per back and lay. To break even or exit at your entry price the price has to move one tick in your favour.
This applies even if you don't take the price on offer but wait for the market to come to your offer as from there you still need a one tick move to break even and a two tick move to profit by one tick.
I hope I'm wrong on this. I probably am given who I'm questioning !
What is an average result?
I'm sure someone much smarter than I am will give you a better answer than what I am about to write but hopefully you will find some of the following information useful.
There is a post on this site somewhere that if you enter a trade purely at random, you will end up in a profitable position (perhaps by only one tick) around 98% of the time. From my own observations (I'm not a stats man so can't back it up with figures) I think the 98% figure is probably correct.
Now on first reading one would think that it can't be that difficult to make money out of the markets, after all if I just flip a coin in order to back or lay, I'm going to be in a winning position 98 times out of 100. Unfortunately a little experience in the markets teaches you that its actually extremely hard to take money out of the market on a regular basis.
There is a post on this site somewhere that if you enter a trade purely at random, you will end up in a profitable position (perhaps by only one tick) around 98% of the time. From my own observations (I'm not a stats man so can't back it up with figures) I think the 98% figure is probably correct.
Now on first reading one would think that it can't be that difficult to make money out of the markets, after all if I just flip a coin in order to back or lay, I'm going to be in a winning position 98 times out of 100. Unfortunately a little experience in the markets teaches you that its actually extremely hard to take money out of the market on a regular basis.
Wildly, if i have understood your post correctly then saying the price has to move one tick in your favour to break even on a single trade is incorrect
In fact the price does not have to move at all and you will still make a one tick profit if you offer money to both sides of the market and both are taken
In fact the price does not have to move at all and you will still make a one tick profit if you offer money to both sides of the market and both are taken
If you back or lay some time before the off, then close at post time you will end up 50% of the time.
If you are focusing on seconds then, as explained above if you take a price out then you will lose around 0.5 of tick in costs on spread. To turn this to your favour simply offer to the market and let somebody else finance that error.
There was a funny blog post a while ago berating scalping for exactly the reason you state. He was a, allegedly, a PhD so you are in good company. It seems many have made the same mistake
If you are focusing on seconds then, as explained above if you take a price out then you will lose around 0.5 of tick in costs on spread. To turn this to your favour simply offer to the market and let somebody else finance that error.
There was a funny blog post a while ago berating scalping for exactly the reason you state. He was a, allegedly, a PhD so you are in good company. It seems many have made the same mistake