Original subtitles

mind think of the long term and as you get you know further

tails and what we need to do is not do what I'm doing right now

the start will just flatline out to a very smooth line

down it's yours to keep for life but yeah I hope that's

know that that high a risk reward which we're going to get

just won't work. So yeah if you're ever not sure about what

more number of trials and so literally just flat lines at

and smaller ostellations as the further it goes out with the

edit and you know play around the spreadsheet and save it

play out over time. So if you click on the link below below

flipping in a row and then you need to try and remember this

to actually see you know how your underlying profit

expectancy to actually play out so that's what these two

because for instance if you were to put this to a pound

of volatility at the start but then you just zoom out in your

in a row right and you start to doubt question hesitate

20 flips and I think you will be surprised at kind of you

actual trading and then develop a strategy that actually has a

exercise is just to see that at the start right your profit

around the numbers you know see how much you want to skew it

you should be on zero it should net each other out but as you

know almost one pound a flip all the way down to you you'll

know how many heads or tails you can actually end up

expectancy you would expect if you were to do you know 500 or

markets right and you know you a good edge you've seen that

your profit expectancy is actually slightly higher at the

really see that the true random nature of how these edges can

actually do have a profit expectancy but the more that

flipped you know more heads than tails because you know

and your you know your average profit for roll should come

expectancy could look really awful or it could look

experiment I guess when you're actually trading in the live

profit expectancy should be five cents but at the moment

area in which you need to input data is and B down here this

probability. So how can you ensure that your proven

lot higher the more that you put it in your favor so on and

performing quite well so what that means is you've actually

and then it will get slowly you know kind of getting smaller

moment you know more than what the calculated profit

these results and what that's telling you is actually your

it there and then what it will do is it will just

repeatedly as many times as you as you possibly can so The only

just because you know it's really good to kind of see

you're actually given to the spreadsheet so it's based on

giving you a bit of an insight into what an edge actually is

everything just grab a coin and do this and you'll see you know

strategy before the edge has a chance to play out. You know,

go negative and it will just be like this big sort of heartbeat

into those trials what you'll see is this big volatility at

the end of the curve around whatever the calculated profit

brilliantly and then over time then right it will adjust and

calculated profit expectancy should be so you know I really

numbers are here so one is the calculated profit expectancy

random distribution you've had more heads than you would

through. So in trading never confuse luck with skill and

just grab a coin and then just put in each result as you get

do encourage you just grab a coin even if you just do 10 or

be really volatile. It'll be all over the place like you

tails so because you have a 10 pence profit gain essentially

1, 000 flips really you should only have a 5 cents edge

profit for you so let's say we flip a few heads couple of

down to zero a flat line out but if you actually grab a coin

there should be the same amount of heads as there should be as

you have done so far the amount of you know information that

can see because we've had more heads here at the moment you

expectancy is. So the main kind of learning point from this

and you'll see that at the start your average profit will

but eventually as you play more and more games or take more and

expectancy that is based on the amount of you know coin flips

honestly how long it sometimes can take for the true profit

more trades with that positive edge eventually you will arrive

so forth so yeah just you know play around with it save it

and you do this for real what you'll see is in sometimes you

and then one is the true profit expectancy so again if you

then how much you would lose and then the only sort of next

over you know whether you lose that's why the calculated

know grab a coin and just do this maybe for you know, 2030

words if you have a proven mathematical edge and a proven

and flip the coin and just populating this just to see how

profit expectancy it's in your best interest to play it

can even have like 1011 maybe even heads or tails in a row

closer as more trials are performed so in much simpler

have to learn to emotionally deal, right? Emotionally deal

what is a true edge it's a 50/ 50 right so really in reality

according to the law the average of the results obtained

results and then trust in the long-term stability as your

kind of be lazy here and not do this but even if you just you

expected value and then it will tend to become closer and

right and it was even then really over the long run right

flips the spreadsheet does go down all the way down to 500

you can get lucky and you can fall the numbers in the shorter

portrayed for your strategy. So as a trader, you're going to

down so yeah it's yours for you to keep for life now there's

probably expect over a large number of trials so that's why

you would fill this out over time right this should even out

you know quite a few winners in a row and be up straight away

profit expectancy is you know quite a bit higher you're

you know the edges just worked in your favor just through

curves that actually all have the same profit expectancy. So

plus the loss which is minus one pounds multiplied by the

because if you put a negative number the form is basically

expectancy of your strategy and of your edge actually starts to

multiplied by the probability of winning which is nought. 5

the graph sort of look so you know it's pretty easy to

at the expected of that edge. The expected average profit

column here which is essentially where you just put

allow you to do is just really give you a good understanding

and it should have already ask you to save a copy down to your

in the notes of this video it should hopefully open this up

and now over the course of the the remaining lessons of this

amount that you lose you still put in a positive number

way that you can ensure that your edge pays out over time is

hover your mouse it will give you a bit more of an better

edge starts to play through. So whether you experience a run of

flip ahead so let's just put in one pound and then how much you

but actually take the time you know to put this in you know

and actually losing money initially and others might hit

bit more information. So yeah put in how much you win and

a little pop up should come up and it just gives you a little

diagram essentially shows is different people's profit

lose if you flip a tail. So you know play around with it with

then just click on file in the top left hand corner and then

in yeah whether you flipped heads or tails so literally

explanation but essentially the true profit expectancy is the

only really a couple of things that you need to enter the

whatever amounts that you like. Just make sure that for the

just so you guys can actually create your own coin toss

begin the game with Sam flipping three tails in a row,

to be a positive number remember yeah then you will see

spreadsheet so the first one being how much you win if you

into a little bit later in this module yeah and you'll just

row, you must know that soon you will experience the

with that uncertain volatility in the short term of your

own drive but if for whatever reason that hasn't happened

every single coin flip so if he has a proven edge he must be

experiment yourself and what spreadsheet will essentially

save it down to your own drive you'll then be able to actually

to keep applying that edge over and over again. So what this

come down to make a copy and then when you click that and

opposite until it balances out and you reach the average

it will come back to that balance of where the actual

module we're going to learn you know how we can apply to our

you've tested it and you've got a pretty good strike rate and

profit for your strategy. So I've created this spreadsheet

some might hit quite a few losers in a row at the start

each what each cell does just hover your mouse over and then

around where that profit expectancy is so yeah play

casino tables and they all have a negative profit expectancy

obviously the more that you increase your edge whoops needs

the the the calculated profit expectancy will obviously be a

play out and you just have to remember that there'll be a lot

a 50% strike rate can be pretty good especially if you have you

then suddenly you sit there and you take 345 maybe six losers

consecutive losing trades in a row or a run of winners in a

expectancy but they quit, walk away, or they change their

against Sarah. So how can you make sure that your proven

profital edge plays out? And it all comes down to understanding

can't handle the pain of losing anymore so he decides to shake

time. They have a great strategy with a strong profit

from a large number of trials it should be close to the

performing the same experiment a large number of times and

of those people who win big in the lottery or big at the

basically a theorem that describes the results of

their negative profit expectancy had a chance to work

the law of large numbers. So the law of large numbers it's

expectancy, it will always work through. Now, we've all heard

profital edge always works through and take advantage of

term but over time and distance, your true profit

automatically fill in the the profit and loss and a running

but if he flips a tail and he loses then he loses one pound.

probability of winning plus the size of the loss times the

remember our profit expectancy formula? Previously, Sam won a

they got lucky in the short term and they cashed out before

situation is zero pounds. He cannot make money in the long

playing these games but like Sarah in the scenario above,

pence difference can be an absolute game changer. So

ninety pence for every tail that lands. However, he just

term. So let's the numbers a little bit now and see if you

the edge that Sam had managed to negotiate in his favor

favor. Yet he still lost and this is what traders do all the

probability of losing which is nought point five. So from a

flip so the profit expectancy formula this proves that Sam

pound for heads and lost a pound for tails so his profit

pounds just like before. However, if Sam flips tails and

hands and hand over the winning Sarah and he walks away. So

negotiates with Sarah and they come to an agreement that if

right? It's a perfectly realistic scenario in a coin

trading, then we need a formula to help us calculate our profit

now has a profitable edge in his game of five pence for

expectancy was zero pounds but now he's negotiating is to to

coin toss. So, there are two possible outcomes, right? Heads

pay Sarah 10pence less when he loses and flip sales this means

toss. Sam has now had three losses in a row and he's now

Sam flips heads, then Sarah still has to give him one

here, Sam played a game with a proven mathematical edge in his

guaranteed to make money now right well not necessarily

well Hopefully for those who've guessed correctly, zero pounds

that he now has a profit expectancy of five pence per

the random event becomes a little bit more complex like in

expectancy. So, let's summarize what we already know about the

Sam flips a heads, in this case, he will make one pounds

probability of losing. So the profit Sam wins is one pounds

or tails and the probability of either outcome is 50%. So, if

So the profit expectation is the amount of profit times the

can make money from a coin toss. So this time, Sam

of winning the same amount of money. So in this situation,

because what Sam didn't discuss with Sarah is how many games

mathematical standpoint Sam's expected profit in the

they would play and this is apps crucial. So let's say they

he loses, he only has to pay Sarah 90 pence. And that ten

down minus two pounds seventy because he has to pay Sarah

Sarah he's going to pay Sarah one pounds so in this situation

it's pretty easy to work out the profit expectation but when

is the correct answer because they end up just cancelling

each other outright because they have the same probability

how much money can Sam expect to make from flipping a coin

ahead and then you divide this by the total number of possible

for calculating the probability of flipping heads the number of

this example we will calculate the probability of flipping

coin toss game Sam is heads and Sarah is tails now every time

heads on a coin is as likely to happen as flipping a tails so

guaranteed no matter what now the probability of flipping a

occurring it always has a value between zero so 0% and one

Sam flips her heads and he wins Sarah is going to pay him one

it has an even chance simple right okay let's move on so

occurring is equal to the number of ways that that event

outcome can't happen and one represents a certain outcome is

can occur divided by the total number of possible outcomes so

equal to a 50% chance so the probability of any event

ways that this event can occur is one right because there's

money into the mix so Sam and Sarah are going to play the

how to calculate the basic probability of a random so for

heads is just one divided by two which is n1. 5, which is

tails right so pretty simple now the probability of flipping

only one way that you can flip ahead you just have to flip

ahead in a single coin toss so the probability of an event

outcomes which is two because you can only flip aheads or a

which is 100% so zero represents an impossible

pounds and then every time Sam flips a tails and he loses

let's make things a little bit more interesting and throw some

understand but more importantly, accept the

to memorize any of it for your actual trading but it is

Why? Because it allows you to realistically align your

probability models in trading, it is important that you know

of a random event occurring. In order to fully understand

concepts. In order for you to trade successfully long term.

exactly how, when, and why you have an edge in the market.

So, money and probability. Probability is the likelihood

your journey. You know a beginner they might find a

imperative for your trading development that you truly

will cause them to start looking for you know other

inevitable highs lows that you're going to experience on

trading that you must understand in order to become

So what this modular's going to do is it's going to teach you

successful. Now, the maths is very simple and you do not need

the basic very basic mathematical principles of

and yet they become become you know pretty disappointed after

system or strategy that's supposed to win 70% of the time

any blockages that you may be struggling with but it is my

not winning seven out of those 10 trades. And so often this

strategies or worse starting to change their rules on the fly.

traders, they have developed a thorough understanding of the

believe it's crucial to your long-term success to understand

firm belief that if you can really get a great

solve the majority of psychological issues that you

actual practical tasks that we can undertake to try to resolve

this before we even start to hop on the charts and learn the

concept of what trading an edge is and you know, I really

may run into. So, that's why we have an entire module based on

technical side of the strategy because the most successful

expectations and keep an objective mindset through the

developing that probability mindset, then this will likely

understanding of what trading in edge is and really

and you know, deep concepts that we'll get into much later

your mindset and psychology. Now, there are many esoteric

massive part of successful trading is really dependent on

in the program regarding trading psychology and your

As you will have seen in the previous lesson, a massive,

proven mathematical edge and a high profit expectancy.