4 probability concepts you need to understand as a trader to improve. 1. The power of large sample size.

As sample size increases, results tend to converge to the expected value. This is known as the Law of Large Numbers (LLN). This is important to know as it plays a huge role in probability and expected value. If you have too small of a sample size it is harder to trust.

2. Percentages don't add together. Adding percentages together directly is usually incorrect because percentages represent relative values, not absolute ones. This may seem basic, but you would be surprised how many traders I have met who don't know this.

3. Fat-Tails By Nassim Nicholas Taleb. While extreme events happen less frequently, they have such an impact that they dominate the statistical properties. This invalidates many common metrics like VaR. One extreme event can have more impact than all other days.

4. Expected Value. EV is the average outcome you can expect over many samples. You would ideally always want to see a positive EV when testing a strategy. But even positive EV strategies can blow up with poor risk management.

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This can not only be applied to investing decisions, but really any decision where you can compute a probability.

I believe that every JS interview was a distraction and the man never hinted anything about their trade secrets.

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great 🧵 mate. can you pls link the simons interview from the first post?

My pleasure.