A Brief Note on Expectancy

Positive expectancy is the true holy grail of trading. Regardless of the methodology used, if the odds aren’t in your favor you’re doomed. But this focus also obscures a broader truth: Life itself has a negative expectancy. Start with life, end without. A certain loss which no strategy can circumvent. How do you salvage this trade?

To maximize returns when forced to play a negative expectancy game the best strategy is to make one bet and go all in. Nature has already put a hard limit on how many times we can play the game, so the only choice left is how many chips to put on the table. Don’t hold back.

Follow the example of casinos in keeping people coming through the door for negative expectancy. By making it entertaining and exciting, by focusing your attention on something other than just money, you may not even notice you’re being fleeced.

[I’m still looking for the free buffet.]


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