Probability
Also called: chance, likelihood, odds
A number from 0 to 1 describing how likely something is. Over many repeats, it is roughly how often the event happens.
A probability of 0 means impossible and 1 means certain; it is often written as a percentage. In markets, probabilities are estimates rather than known facts.
The chance of something happening at least once in several independent tries is 1 minus the chance of it never happening.
Example
A strategy that works 90% of the time fails at least once in ten tries about 65% of the time (1 − 0.9 to the power 10).
Learn more in these lessons
- Probability and expected valueWhat is expected value, and why does it matter for investing?
Related terms
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