Twenty tests create more chances for a false discovery #MultipleTesting #FalsePositives #Backtesting

What this market video covers

Testing twenty ideas gives noise twenty chances to look convincing. Consider a hypothetical example where every null hypothesis is true. Each test has a five percent false positive rate, and all twenty tests are independent. These are declared assumptions, not facts about trading strategies. The chance of no false positives is zero point nine five raised to

Use this analysis as general education. Confirm current prices and conditions independently, define invalidation before entry, and size every position for the loss you can actually tolerate.