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Mathematical Expectation in Trading Systems-Must read

  
  Education
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mathematics

Here is a brief lesson in how mathematical expectation works.

On the roulette wheel there are 36 numbers, double zero, and the blank. That makes 38 spaces to bet on. Each bet costs $1 to play. The winner pays $35. To calculate the mathematical expectation of the roulette wheel you do the following:

Multiply the probability of winning by what you win when you win. And from that, you subtract the probability of losing by the cost of each bet. The difference is the mathematical expectation. If it’s positive, it’s a fair bet. If it’s negative, you don’t play.

[(1/38) x (35)] – [(37/38) x (1)] = mathematical expectation of playing roulette.

(35/38) – (37/38) = (-2/38) or (-1/19).

So in the case of the Roulette wheel, the best bet is not to play. The problem is playing Roulette is fun! Most professional money handlers don’t find losing money fun. And that’s the difference between the professional and an amateur.

A Winning Mindset is Required To Succeed

  
  Education
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  • A losing trader can do little to transform himself into a winning trader. A losing trader is not going to want to
    transform himself. That’s the kind of thing winning traders do.
  • The winning traders have usually been winning at whatever field they are in for years.
  • It is a happy circumstance that when nature gives us true burning desires, she also gives us the means to
    satisfy them. Those who want to win and lack skill can get someone with skill to help them.
  • The “doing” part of trading is simple. You just pick up the phone and place orders. The “being” part is a bit more subtle. It’s like being an athlete. It’s commitment arid mission. To the committed, a world of support appears. All manner of unforeseen assistance materializes to support and propel the committed to meet grand destiny.
  • In your recipe for success, don’t forget commitment – and a deep belief in the inevitability of your success.
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