Eclipse Technologies

Averages are a fundamental statistical concept that is widely used in everyday life, and practically everyone has heard of them at some point. Averages can provide valuable insights into the world around us with their predictive power, but many people tend to underestimate their ability and overlook their significance in understanding complex systems.The Law of Averages is a well-known concept that relates to the probability gradient that appears in every chain of events in the universe. It states that over time, the average outcome of a random event will converge to its expected value. This concept is closely related to the Law of Large Numbers, which asserts that as the number of trials in an experiment increases, the average of the results will approach the expected value of the “experiment”. One example of this principle is flipping a coin. If you flip a coin enough times, the number of heads and tails will roughly even out to 50/50.

This principle can be applied to financial markets- by analyzing historical data, we can identify statistical trends and predict future outcomes, assuming that the Law of Averages will continue to hold true. Furthermore, we can make the Law of Large Numbers work for us as well- the more trades we take, the more likely we are to have a stable average win/loss ratio (as long as the reason for taking the trade remains sound).Recurrence is another concept related to averages, referring to the tendency of events to repeat themselves over time. For example, if a particular stock has historically performed well during a certain time period, traders can expect it to perform similarly during the same period in the future on average, over many trades. (this is the law of large numbers in practice).Just like the orbit of a planet is a physical manifestation of the average impact of all of the universe’s gravitational pull on that planet, we can use averages in markets in a similar way. By measuring factors that influence prices, we can continually safely bet that the averages of price movements related to these factors will remain the same, provided we have the law of large numbers on our side (we take many trades). The Law of Averages and the Law of Large Numbers can help us make sense of the complexity of the market (and the Universe!)