What you will learn
- Expectancy
- Drawdown
- Uncertainty
- Decision to retain or reject
Expectancy
Report net expectancy, dispersion, drawdown and the number of observations rather than only total profit. Different measures reveal different weaknesses. A profitable average can coexist with large losses or an unstable sample.
Drawdown
Compare with a simple baseline under identical dates, costs and information timing. The baseline might be a simpler rule or no activity, depending on the question. It provides context for whether complexity adds useful evidence.
Uncertainty
Sensitivity analysis changes plausible assumptions such as costs, delays or neighboring parameters. A result that disappears under small reasonable changes is fragile. Do not call the most favorable stress test a conservative case.
Decision to retain or reject
Interpret small samples cautiously. Uncertainty depends on variability and dependence, not merely trade count. Several trades from the same event may contribute less independent evidence than their number suggests.
Worked example
A study reports 30 profit over ten trades but omits a 40 intratrade drawdown and all financing. The headline is insufficient to assess either net return or the path of risk.
Try it yourself
List the additional measurements needed and explain how a higher trade count could still fail to provide independent evidence.
Show the worked solution
Reconcile costs, record marked-to-market drawdown, show outcome distribution and identify clustering. Trades driven by the same event or overlapping positions can be dependent; their count alone does not determine precision.
Apply this to your course project
Submit a rulebook, chronological trade sample and unseen validation results.
Keep the calculation inputs, assumptions and decisions with your work. Practical exercises are self-reviewed; the scored knowledge checks assess the questions shown, not an independent certification of practical competence.