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"Trading: Measurement Not Prediction" Understanding the Importance of Normalization in Trading
Trading is a measurement, not prediction. It is important to measure rather than predict the future. Normalization is crucial in trading because it allows us to factor in the idiosyncrasies of the market. By normalizing and considering how a security typically trades, we can identify fair values and trade based on that information. This helps us find parameters that are roughly worth and allows us to identify outliers in the market.