Definition. The number of observations conclusions are drawn from. The smaller the sample, the bigger the influence of chance on the result.
How it works
Tversky and Kahneman (1971) described the “law of small numbers”: the tendency to expect a small sample to faithfully reflect the whole. In reality, short series of results are very variable.
Example
Ten trades are too few to judge a method's win rate. Even a good method can show more losses than wins over such a short series.
What to watch out for
Don't change your method after a few results. Judge it on as many decisions as possible made by the same rules.
You'll find the full explanation with graphics, examples and exercises in the 🧘 Trader's body and mind space, and its use in the live market in the 🔴 Live Room. Both are available to Club members (in Polish).
