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# probability

Discussion in 'Options' started by Andy_Trade, Nov 23, 2007.

What is the proper way to calculate the probability of a trade being profitable in the end?

Thanks

2. ### Hansel H

Good luck with this one.

Well why am I seeing people talk about "high probability trades" and such?

4. ### shliang

66% seems very high to me, esp. when avg winner / avg loser > 2

huh?

Reference to standard deviation? Although it should be 68% within one SD either way...based on a Gaussion distribution

7. ### shliang

if u bet 100 times, u have 66 winners, 33 losers. On average for each winner u win 2 while u lose 1 per loser.

8. ### rosy2

you create a probability distribution using the instruments volatlilty and current price. the use prob density function.

or quick way is to look at the delta

9. ### Hook N. Sinker

Easy. All you have to do is misuse mathematics by predicting the behavior of nonexistent prices in the nonexistent future.

Statistics describes the past. What might happen in the future is an opinion.