i think this rather known as mathematical expectation or expectation value. edge is something different, non quantifiyable.
Happy to hear you are doing fine. In the context of the original thread question I consider your following comment to be VERY bad advice. >I develop and trade intraday stock trading systems, and >the only parameter that matters is cents per share traded. >If that can exceed the commission per share, then you have >a winning system. I suppose it would depend on the definition of the term "winning system". I can find any number of systems that by the above definition will show a profit when backtesting that one would have to be a dumbass to trade live. Again, best wishes JB
Turok, I guess what one man considers VERY bad advice is another man's golden metric. I admit that I was making the assumption that someone who is developing trading systems isn't a total dumbass, and has some concept of market mechanics and risk management ... this could be a bad assumption. Just to clarify my position, I trade fully automated intra-day (no overnights) stock trading systems, and the only metric I really worry about is cents per share. Regards, Slave2Market P.S. Send me some of those strategies, I'm always looking for new ideas.
2 censt: Perhaps the usual way to look at this mathematical expression would be calculating its resulting values. However, an alternative way would be looking at the process and the main factors of generating its resulting values: Q You may say this mathematical equation looks fairly easy to apply so why isn't everyone getting rich off it? The real skill in applying this equation successfully and, therefore, trading successfully is being able to evaluate your win odds, loss odds, avg gain, avg loss as accurately as possible. A slight misjudgement in any one of the factors would turn a profitable net return trade to a net loss. That is the art of trading: being able to objectively assign odds in different Scenarios and Market Situations and quantify them through the Net Expected Return Equation. --- Lee Ang (Computerized Trading, Mark Jurik), P65 UQ