I · Foundations
Station I of The Quant Map: the probability toolkit. Losing streaks, fat tails, expectancy, drawdowns. Articles in reading order, plus the free 65-page map PDF.
the toolkit you think with, pedagogy, not alpha
A strategy that wins 55% of trades still hits eight losers in a row about 0.17% of the time, once or twice per thousand trades. That run is the strategy working. Risk 2% of a $5,000 account and the streak costs about $800. Risk 15% because the setup looked clean and the same streak is the account. A second trap sits in the average: +60% then −40% advertises +10% a year, and $100 becomes $96. Compounding pays the variance. The average does not.
Nothing on this station earns money. It is the arithmetic that stops you from donating it: what a losing streak costs at your size, why the average of +60% and −40% is a loss, why an 87% win rate can still bleed. Pass through once before the first backtest and again before the first live dollar.
The Quant Map PDF works this spine through example research: five full descents from observation to live rule, and a library of 835 strategy entries, each with a named payer and a named failure mode. Get the free PDF on the Start Here page.
Reading order
Top to bottom. Stop at the first article you cannot apply to a live trade; that is the one to read slowly.
| Article | Why it is on this row |
|---|---|
| Why Trading Is a Probability Business, Not a Certainty Business | One trade is one draw. The standard deviation of trade returns runs several times the edge, so the signal shows up through sample size. |
| Fat Tails: Why Gaussian Thinking Breaks Trading Systems | The streak table gets worse once the left tail is fatter than a normal curve. Gaussian size is how the account dies on an "ordinary" day. |
| Get-Even-Itis: The Most Expensive Disease in Trading | The streak is when you edit the size. The calm version of the rule has to be the one that is already written. |
| Average Drawdown vs Extreme Drawdown | One worst loss is a single point. The average drawdown is the distribution you size to. |
| Why Percent Profitable Is Overrated | An 87% win rate describes the pleasant trades. Expectancy includes the loss that gives the money back. |
On the map: The grand map · II · Market architecture →