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There's a big question that directly impacts every choice we face: "Do I have enough data to make a decision?"
We have to ask ourselves some version of this many times each day, for many different reasons, but never more so than when we're considering a trade or investment.
In many cases, that data comes to us in the form of… uh-oh… statistics. And those can be frustratingly pliable, easily distorted, and shockingly easy to misinterpret.
There's an old chestnut that essentially says that you need 30 data points for reliable statistical significance.
I spent 15 years as a chemical engineer at DuPont, where I had the chance to work with some truly world-class statisticians on various production quality issues.
And every time I talked with one of them, I was amazed at how this very useful field is mired in terminology and minutiae that causes us more, let's say, "practically minded" folk to pull our hair out!
I found that getting a simple answer from a statistician was a bit like trying to take a sip out of a fire hose.
That's not a particularly good situation to find yourself in when you're on the verge of putting your hard-earned money on the line and making a move with it.
So together, let's look at the right way to take statistics into account when you're getting ready to make a four-figure decision. It's remarkably easy.
About the Author
Nationally recognized technical trader. Background in engineering, system designs, and risk reduction. 26 years in the markets.