Probability for Trading Signals

1. What term describes the probability that a trading signal incorrectly predicts a price movement (false positive)?

True Positive Rate False Positive Rate Precision Recall

2. Which of the following are key probability metrics for evaluating a trading signal's reliability?

Win Rate False Negative Rate Sharpe Ratio Probability of Ruin

3. A trading signal with a 90% precision means there is a 90% probability that a generated signal will result in a profitable trade.

True False

4. What is the abbreviation for the probability that a trading signal correctly predicts a price increase (True Positive Rate)?

5. In Bayesian probability for trading, P(Price Rise | Signal) is an example of which type of probability?

Prior Probability Posterior Probability Likelihood Evidence

6. Which of the following scenarios increase the probability of a trading signal being profitable?

Higher True Positive Rate Lower False Positive Rate Higher False Negative Rate Lower True Negative Rate

7. The probability of a trading signal being accurate is equivalent to its accuracy metric (TP+TN)/(TP+TN+FP+FN).

True False

8. What term refers to the weighted average of a trading signal's potential outcomes, considering their probabilities and returns?

9. If a trading strategy has a 60% win rate and 40% loss rate, what is the probability of losing 3 consecutive trades?

6.4% 16% 40% 60%

10. The ratio of the probability of a true positive to the probability of a false positive is known as the...

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