Probability Edge
Probability edge is the difference between a trader's estimated probability and the probability implied by the market. For example: Market: 55% Trader estimate: 65% Probability edge: 10 percentage points before considering costs, uncertainty in the estimate and other risks.
Why it matters to you
This gives traders a straightforward way to quantify disagreement with the market. But a larger difference is only valuable if the trader's probability estimate is reliable.
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