A Trade A Day

So, where I live in New York State, there’s an idiotic commercial running for the New York State Lottery.

Don’t get me started on what a bane government-sanctioned lottery is to society. Sure you have to be mathematically challenged to play it from the start. It’s a money-sink for the ignorant and the desperate. Those that would be better off using their resources to educate themselves and improve their financial situation are trapped in institutionalized gambling sold under the guise of a harmless game. One that benefits education and one you have a chance to win.

Complete Bullshit. Well the NYS lottery at least gave me some fodder for this post.

Take a look at the commercial in question:

1 in 9 odds of winning! You’re kidding me.
Well, using Chris Perruna’s handy expectancy calculator, I ran some numbers:

I set my account size as $100 bucks. Next I set my stop size to 100% because when you play lottery, you lose 100% of what you risk. This gives me a position size of $1 which is the minimum size of the game mentioned in the commercial above.

Now, you know most people won’t have the discipline to risk 1% of their equity in any endeavor. But let’s keep going.

So now, I ask the question: How much do you need to win to be profitable. Well, assuming your odds are 1 in 9, you would need to win close to 1000% more than you risked each time you did win. But get this, the minimum winning odds aren’t even 1 in 9 (that’s the overall odds of winning). The actual odds of winning the minimum win is 1 in 11, and it isn’t even a cash prize.

In order to actually win some cash the odds go up to 1:109. Lottery is a joke. If trading is a losing game, playing lottery is akin to setting your money on fire and watching it burn.

Look, if you have the most mediocre of systems, I would be willing to wager you can win 30% of the time. Download Chris’s calculator and see what is possible. If you can stick with your system, winning just a small percentage of the time, you can do amazing things with your money.

You just need to stick with your system. Adhere to sound risk management rules and trade with discipline. Otherwise you might as well play the lottery.

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