Quote from cfd_trader:
AyeYo, it seems like you're confusing two issues.
It is true that on average the up days are up by a larger amount than the down days.
HOWEVER - you kinda skip the fact that you could very well be LOSING on an UP day and winning on a down day (and vice versa of course).
In that case, does your account grow in value, or decrease in value, over such 2 trades?
Obviously, it would *decrease*, all the while the underlying index price will have *increased*.
Over all, over a large statistical sample of equiprobably distributed winning and losing trades (same probability to win or lose over time, but not necessarily by the same amount on each trade, but also winning trades do NOT necessarily have a bigger amount than losing trades), you end up with a grand total of... ZERO net profit.
No less, but no more either.
That's the way I see it anyway, maybe you'll be changing your view on this, though not sure I explain it too well...
That makes far more sense that how he stated it, but let me explain how I'm looking at it.
The market is biased long, purely from a historical perspective. Also, as stated by someone else, even if the market didn't trend up over time, the probability of it doubling is, in the real world, infinitely higher than the probability of it going to zero. So, again, the market is biased long. The probabilities are NOT normally distributed.
So what does that leave us with? That leaves us trying to toss a coin to make a red/black call on a roulette wheel that's biased towards black. It just doesn't work over time.