Your browser (Internet Explorer 6) is out of date. It has known security flaws and may not display all features of this and other websites. Learn how to update your browser.
X

Posts tagged ‘Law of Large Numbers’

Articles

Nuts & Bolts: The Law of Large Numbers

Trading is a stochastic process;  i.e, the outcome of each trade is not deterministic and has a distinctly random bias.  Sometimes you win, sometimes you lose.  Sometimes you win big, sometimes you take it in the pants.  Often your winning or losing trades will cluster together in a row;  Other times, they’ll alternate in a more noisy fashion.

More…

Articles

Nuts & Bolts: Expectation

When I first started trading nearly 100% of my focus was on the percentage of my trades that were winners (win probability).  After all, winning feels good and I wanted to maximize that much as possible.  But over time I learned that the win probability of a system is largely irrelevant (regardless of how good it makes you feel);   Instead of worrying so much about winning I really should have been focusing on my system’s expectation.

More…