Probability of Marginal Performance
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A trading system becomes profitable in practice when a given goal is achieved. The likelihood that a goal is met depends upon the dollar level of the goal and the time it takes to persist in one's trading when marginal results develop over time. Certain situations will occur that can be identified as marginal performance. Marginal performance will readily occur in any profitable system when profits and losses statistically alternate prolonging the ultimate targeted goal.

In TSPE, the difference between the probability of preserving your capital (the center curve on the chart) and the probability of certain goal achievement is the difference between 1.0 and the values represented by the horizontal center curve on the performance chart for high levels of invested capital. This difference, for purposes of explanation, is known as the Probability of Marginal Performance. Choosing a very large, but unreasonable "Time Target" will force all scenarios for a winning system to approach 1.0, given that infinite capital is available and the Probability of Marginal performance is zero.

If the Probability of Marginal Performance is, say 2% for a given level of invested capital, this means that 2% of the time you entered into a case where profits would not elevate you sufficiently beyond your invested capital to achieve your goal. It does not mean that you lost 2% of the time. It simply means that you did not achieve your goal. This is so because your invested capital remained intact. The TSPE user should understand that there will be occasions where capital is preserved, yet capital remained in place a finite percentage of the time.

The following essay on Goal Selection by Bob Pelletier tells more about the process of goal selection and interpretation of results.

When both targets are entered to your satisfaction, click [Next] to view the Capital Analysis chart.