Mathematical Expectation for a trading system
Mark Knecht wrote:
Hi Mark, On Thu, Oct 15, 2009 at 1:28 AM, Mark Breman <breman.mark at gmail.com> wrote:
[...]
Ralph Vince warns the reader that the trade system to start with should have a positive Mathematical expectation to start with, because the optimal f can not turn a losing system into a winning system.
Independent of the calculations did your system make money historically? If it did then it has a positive expectation.
The truth of that assertion depends on at least two assumptions: * Selection bias is not very strong. * The market will behave in the future like it did over the historical period. Patrick Burns patrick at burns-stat.com +44 (0)20 8525 0696 http://www.burns-stat.com (home of "The R Inferno" and "A Guide for the Unwilling S User")