This is why I like to used the terms 'perceived ev' (or, our expected expectancy
) and 'true ev' (our real expectancy). Unless we know the exact values of our equation (which we cannot know!), we're not dealing with our real, or true expectancy. All we're doing is estimating it based off previous results. This is obviously flawed, as our results don't accurately reflect our edge. This is why perceived expectancy should really be given as a range and confidence level, such as 95% that our expectancy is between x% and y%. Over time we would expect that the perceived ev to more strongly reflect our true ev, but it takes a very significant sample to get it down to a reasonable range, and 95% is well, not 100%.lukeaye said:
So for example, if a certain line was to hold 70% of the time, you would consider that reaction to be the expected result? I would include the other outcomes in the expected result, as expectation is really just an average of all outcomes. It can be misleading because in mathematics, expected value is a mean average, while most people use the word expect to talk about mode averages.
Almost everything in life does, it's just that traders are more aware of it
. Even MM is a matter of probability, as stops may not trigger for whatever reason, or the markets might drive through our stop and cause major slippage, resulting in a loss far greater than expected. I imagine some people got caught out in the 200 pip news move last night on the British pound!
