Classify first¶
One-liner: Say where the money comes from first, then pick the ruler. Don’t kill a trend or fat-tail sleeve using win rate or “drop the biggest few trades” alone.
Four types (in plain language)¶
| Type | Where the money comes from | Don’t |
|---|---|---|
| Alpha | Conditional expectation is better even on ordinary days | Prove alpha using only a big bull win |
| Fat-tail harvest | A few extreme paths pay | Cut the right tail to raise win rate |
| Beta | Standing on a known exposure (trend / market) | “Protect” long beta with a short filter |
| Useless | Loses across windows | Keep sweeping thresholds to save the curve |
Mnemonic: factor = a common paying source; beta = your exposure to it; alpha = the money left after those are paid out. Most of what looks like alpha lives in beta.
Wrong vs right¶
| Wrong | Right |
|---|---|
| Golden-cross win rate 35%, dropping the biggest three trades is negative → “no edge”. | Treat the golden cross as beta / trend exposure first. Negative-after-Top-3 is often arithmetic shape, not a verdict. |
How this repo uses it¶
- MA golden cross → treat as beta first
- P99 big-order chase → fat-tail right tail
- Monday rebound → calendar alpha (even if weak, judge it with the alpha ruler across windows)