4 mathematical concepts that will improve your trading.
(Explained Simply).
1. Law of large numbers
(Explained Simply).
1. Law of large numbers
The law of large numbers is the backbone for most systematic trading,
Without it, we are making decisions off insignificant amounts of data.
With more samples, we get closer to the true expected value.
Allowing for clearer and less uncertain conclusions.
Without it, we are making decisions off insignificant amounts of data.
With more samples, we get closer to the true expected value.
Allowing for clearer and less uncertain conclusions.
2. Measure of Central Tendency
This includes:
• Mean
• Median
• Mode
Each have their uses but a common mistake:
Using mean instead of median.
The mean overly compensates for outliers in the dataset,
Which skews the average and is why the median is a better depiction.
This includes:
• Mean
• Median
• Mode
Each have their uses but a common mistake:
Using mean instead of median.
The mean overly compensates for outliers in the dataset,
Which skews the average and is why the median is a better depiction.
3. Probability distribution
Displays the likelihood of an outcome,
E.g. the percentage change on any given day.
Understanding probabilities for each outcome is crucial,
But the certainty of an outcome on any day is impossible,
But over enough samples is probable.
Displays the likelihood of an outcome,
E.g. the percentage change on any given day.
Understanding probabilities for each outcome is crucial,
But the certainty of an outcome on any day is impossible,
But over enough samples is probable.
4. Standard Deviation
No mean or median in trading is a static number,
There are spreads around each statistic in a data set.
This can be used on stock prices such as VWAP bands,
Or to statistics on trading data.
Helping us see the potential variance we can expect.
No mean or median in trading is a static number,
There are spreads around each statistic in a data set.
This can be used on stock prices such as VWAP bands,
Or to statistics on trading data.
Helping us see the potential variance we can expect.
Being aware of these 4 concepts,
Will get you started understanding trading is all probabilities.
Improving your decision-making.
If you find this type of content valuable and want more every week:
1. Follow me @GoshawkTrades for more.
2. Jump to the top & retweet.
Will get you started understanding trading is all probabilities.
Improving your decision-making.
If you find this type of content valuable and want more every week:
1. Follow me @GoshawkTrades for more.
2. Jump to the top & retweet.
I recently crossed 105 traders that I've assisted in turning their strategy ideas into code.
One trader's algo now manages $1,000,000 of capital.
If you know a trader of 2+ years looking to grow their trading to the next level using code.
Click below:
unbiasedtrading.info
One trader's algo now manages $1,000,000 of capital.
If you know a trader of 2+ years looking to grow their trading to the next level using code.
Click below:
unbiasedtrading.info
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