Profitable Trades
probability =  -------------------
                 Total Trades 

Suppose that you have made nine trades, six of which turned out to be profitable.

                 6
probability =  -----  =  67
                 9

What is the probability of winning for a future trade?

• The denominator of the fraction will increase by one for any outcome.
• But with the numerator, two options are possible - a future transaction may turn out to be either profitable, or unprofitable.
  • In other words, we have two possible options:

                (6+1)            6
probability =  -------   or   -------
                (9+1)          (9+1)

Using the average of these values, has the estimate of the probability of winning as follows:

                 6 + 0.5
probability =  ----------  =  0.65
                  9 + 1