Tag Archives: expectancy

The Secret to Profitable Trading

Posted on March 20, 2012 by Michael Harris

Regardless of your market and timeframe, profitable trading requires that the profit expectation is greater than zero. However, this is a requirement of profitable trading and not the secret as some book authors and academic types argue. The secret is finding … Continue reading →

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The Many Faces of Trading Expectancy

Posted on November 25, 2011 by Michael Harris

Some authors insist on defining trading profitability using the notion of expected value or expectation, a.k.a expectancy. However, it would only suffice for them to say that a trading system, trading method, or even investment program, is profitable if the net … Continue reading →

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Optimal Position Size Methods and Other Misconceptions

Posted on August 26, 2011 by Michael Harris

Optimality usually refers to a solution to a problem derived with respect to some objective function. A solution that is optimal with respect to a given objective function can be non-optimal with respect to another objective function. In trading, for example,  there is the well-known %Kelly method for calculating position … Continue reading →

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Trading Probabilities and Common Sense

Posted on May 27, 2011 by Michael Harris

A man appears from nowhere and tell you that he knows your total worth is X amount of money. He proposes to you a game of tossing a fair coin (independently confirmed to be fair) just twice and he will pay … Continue reading →

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Time to Hire a Monkey? Not Really

Posted on March 11, 2011 by Michael Harris

Recently I have noticed a renewed interest in a few blogs and forums about “monkey style trading”. This type of trading usually involves coin tosses, percent stop-losses for risk management and trailing stops for profit taking. This is how it works in principle, according to its proponents … Continue reading →

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What is a trading “edge”? – Part II

Posted on December 30, 2010 by Michael Harris

In my last post I made a reference to a popular definition of a trading edge that can be found in the trading literature and dicussed in various forums. This definition of a trading edge corresponds to what is usually referred to as  expected gain, … Continue reading →

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What is a trading “edge”?

Posted on December 17, 2010 by Michael Harris

I have been reading a few papers lately on the subject of fund performance results and their statistical analysis. I must admit I was very surprised and at the same time very disappointed by the way this subject is approached, especially by … Continue reading →

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