The Joy Of Trading with Statistics by Ben Warwick
For many of you who have traded in the past, the title of this article may take you by surprise. How can trading be work of joy? Only when you are winning, obviously, but there's more to it than that. Systematic trading can be a joy if you are convinced that your decisions are based on favorable probabilities. Let me focus on the three most often used methods in my mathematical arsenal — the Kruskal-Wallis test, the Sharpe ratio, and optimum trade size analysis.
The Kruskal-Wallis (K-W) test is a statistical method dating from the 1950s. Although it has been used for the most part in the medical field to test the validity of drug trials, I have found it to be quite useful in differentiating between trading systems.