Comments on: Prop Trading Firms & Expected Value

By: Mathematical Expectation Of A Trade | MartinKronicle

Mathematical Expectation Of A Trade | MartinKronicle — Wed, 20 Jan 2010 11:27:05 +0000

[...] Expectation Of A Trade January 20 2010 | 3:22 am PST ShareI received a lot of emails to my post yesterday about the expected value of a trade. Only one person got the correct answer to the game of flipping 2 Aces off the top of the deck [...]

By: martinkronicle

martinkronicle — Wed, 20 Jan 2010 11:09:47 +0000

Well done!

By: maple

maple — Wed, 20 Jan 2010 07:34:53 +0000

I would never put this trade on.

This is not a trade, it's a gamble.

By: synhawk

synhawk — Wed, 20 Jan 2010 04:47:06 +0000

Oops Michael asked for Math. This reminds me too much of school Michael ;)

So I did a probability intersection of two events.

Event A is odds of picking an ace out of 52 cards (4/52).
Event B is odds of picking a SECOND ace out of 51 cards (3/51)

Intersection probability formula is P(A) * P(B). Which gives us .00452489 * 100 or .45 percent chance to win $100. So we're paying $1 a pop to win $100 yet we don't win at least $100 every 100 times we attempt this so it is not even break-even, it is a negative expectancy proposition.

By: martinkronicle

martinkronicle — Wed, 20 Jan 2010 03:09:47 +0000

Well done!

By: maple

maple — Tue, 19 Jan 2010 23:34:53 +0000

I would never put this trade on.

This is not a trade, it's a gamble.

By: Tweets that mention Prop Trading Firms & Expected Value | MartinKronicle -- Topsy.com

Tue, 19 Jan 2010 12:49:29 +0000

[...] This post was mentioned on Twitter by Michael Martin, Winfield Russell. Winfield Russell said: RT @Martin_Kronicle: Prop Trading Firms & Expected Value: To trade successfully, you have to know the expected value .. http://bit.ly/8iFoVM [...]