Tag: Trading Math

Beta Weighting Explained
Apr 01

What is Beta Weighting & Why You Should Use It

Beta weighting is a fundamental risk management technique that is commonplace in every professional trading institution. But sadly, many retail traders shy away from it because, at first glance, it does seem complicated. My goal with this article is to change this. There is a reason why so many professional traders use beta weighting on a daily basis! After reading this article, you should be able to fully understand this reason and apply beta weighting Read more

Probability Distribution Of Stocks
Mar 20

The TRUE Probability Distribution of Stock Market Returns

The goal of a trader is to best possibly position him/herself to maximize their chances of winning. To do this, it is crucial that you as a trader understand the underlying probability distributions of stock market returns. Without having a good understanding of price distributions, you might base your entire trading approach on completely flawed assumptions. This can have detrimental consequences and is one reason for financial crashes and crises. The purpose of this article Read more

Is The Stock Market Predictable
Mar 11

Is The Stock Market Predictable? The Random Walk Theory

What does the stock market have in common with random movement? The Random Walk Theory says everything. According to the Random Walk Theory stock price changes happen in a so-called random walk. This means they are entirely random and therefore cannot be predicted in any way, shape, or form. Due to its implications, this is a very controversial theory that has sparked a lot of debates, even among well-known economists and traders. Research studies exist Read more

black scholes model explained
Oct 29

The Black Scholes Model Explained

The Black Scholes (Merton) model has revolutionized the role of options and other derivatives in the financial market. Its creators Fischer Black, (Myron Scholes) and Robert Merton have even won a Nobel Prize for it in 1997. Still today, the Black Scholes model plays a huge role in the world of derivatives and options trading. In this article, I will breakdown the Black Scholes formula, its implications about how options are priced, and much more. Read more