Moneyrules -welcome to the industry. It is all too apparent that you haven't been around for long. Fresh out of school maybe? You've got a lot of things to say -practically everyone of them is wrong. Your first post was nonsense, but let's start with something simple. Did the cme really not have after hours trading before 2000? If that is the case then my recollections of globex and project A in the 90s must all have been imagined. More shocking are my memories of standing in the pits in the evenings. Could I really have just imagined the hundreds of other people there? Very worrying. Either I need to see a shrink or you need to get a proper education...
I get 10 / 100 as a 10% profit margin. A 5% drop in revenue = 95, and a profit of 9.5 . The drop in profits is 10 - 9.5 = 0.5 As a percentage = 0.5 / 10 = 5%. What am I missing?
Correct, By holding longer term I am still making approx the same amount of monthly ticks that I used to when sitting in front of the screen all day scalping.Also, by adopting my new trading stratedgy I am not bored senseless all day by just looking at size of Bids/offers.
Fixed costs... You are assuming the fixed costs change with the revenue. Lets assume on 100 sales, the fixed cost are 70 and the variable were 20, then yes the profit margin would be 10%. Now lets assume sales drop to 95. You still have a 20% variable cost rate, but the fixed costs stay the same at 70. Your profit is now $6, a 40% decrease
You are assuming that that 10% profit margin on sales of 100 means that there is a fixed percent profit/dollar. You would thus assume that had the same business had only $1 in sales, it therefore had a dime profit. Not so ... in all likelihood, the business is losing $89. What you are missing the concept of "breakeven" - the point at which costs and revenue are equal. If a business has a $90 breakeven (salaries, utilities, insurance, licensing fees, interest payments, etc.) and it has sales of $100, then it has a profit of $10, which,as you pointed out would be a 10% profit margin. If sales drop 5% to $95, then the profit will have dropped by 50% ($95 sales - $90 expenses = $5 profit/$10 profit = 1/2 = 50%. I won't get into gross vs. net margin. Let's just say that business is a game of margins.