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Why Expected Value Is Not Enough in Production Trading Systems
This story was originally published on HackerNoon at: https://hackernoon.com/why-expected-value-is-not-enough-in-production-trading-systems.
Positive expected value isn’t enough. Why real trading systems fail without risk control, time-horizon awareness, and survival-first optimization.
Check more stories related to finance at: https://hackernoon.com/c/finance.
You can also check exclusive content about #quantitative-finance, #numerical-methods-in-finance, #quadratic-optimization, #expected-value-trading, #quantitative-trading-risk, #cvar-optimization, #kelly-criterion, #financial-risk-management, and more.
This story was written by: @nnilia. Learn more about this writer by checking @nnilia's about page,
and for more stories, please visit hackernoon.com.
Expected value optimization fails in production because it ignores the path to profitability—our system had positive EV but bled capital through occasional wins followed by persistent small losses. We fixed it by implementing CVaR constraints, fractional Kelly position sizing (25% of theoretical), and robust optimization that assumes our model is wrong, trading lower theoretical returns for survival and consistent compounding.
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By HackerNoonThis story was originally published on HackerNoon at: https://hackernoon.com/why-expected-value-is-not-enough-in-production-trading-systems.
Positive expected value isn’t enough. Why real trading systems fail without risk control, time-horizon awareness, and survival-first optimization.
Check more stories related to finance at: https://hackernoon.com/c/finance.
You can also check exclusive content about #quantitative-finance, #numerical-methods-in-finance, #quadratic-optimization, #expected-value-trading, #quantitative-trading-risk, #cvar-optimization, #kelly-criterion, #financial-risk-management, and more.
This story was written by: @nnilia. Learn more about this writer by checking @nnilia's about page,
and for more stories, please visit hackernoon.com.
Expected value optimization fails in production because it ignores the path to profitability—our system had positive EV but bled capital through occasional wins followed by persistent small losses. We fixed it by implementing CVaR constraints, fractional Kelly position sizing (25% of theoretical), and robust optimization that assumes our model is wrong, trading lower theoretical returns for survival and consistent compounding.