CRITERIA FOR DETERMINING EDGE
The greater the quantity of our sample size, the better chance we have of accurately determining our edge. Sample sizing is a powerful component to determining a probable outcome and is an essential to any valid back-testing plan. The law of large numbers goal is not intended to precisely predict a future outcome but merely to reduce the differential of the expected outcome vs. the actual one. Just because the ever-changing variables of the market are at work, providing a variance that even the best traders cannot detect, we can use a valid sample size to aid in detecting edge. In order for a historical sample to be considered eligible for possible detection of edge, we must be sure our historical tests meet the following criteria:
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