EDGE VS LUCK: LONG-RUN THINKING
Plain English
PM is high-variance: a 60%-edge trader will still lose 4 out of 10 individual trades. Distinguishing genuine edge from luck requires sample sizes most retail traders never reach.
Going deeper
Statistical reality: at 60% true win rate, you need ~300 trades to be 95% confident your edge isn't random. Most traders quit (or scale up dangerously) after 20-30 trades, when the noise still dominates. Track rolling 50-trade hit rates and rolling 50-trade ROI. Be especially skeptical of strategies with small sample sizes — even a coin-flip strategy can show 'profit' over a few weeks. Edge is verified by consistency across regimes (election year vs. non, high vol vs. low), not single hot streaks.
Examples
Hot streak fallacy
A trader wins 8 of first 10 PM trades at 60% true win rate. Probability of this happening by luck alone: ~12%. Don't 5x position size yet — wait for 50+ trades.
Drawdown discipline
A 60%-win-rate strategy will produce 5-trade losing streaks ~6% of the time. Pre-commit to max drawdown rules so a normal losing streak doesn't trigger a strategy abandonment.