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Module 06 · Trading Academy
Statistical Inference
Most “unusual” market events are not unusual at all — they only seem so to traders who never bothered to compute a baseline. This module gives you the math vocabulary — sigma deviations, rolling baselines, Bayesian updating, hypothesis testing, and confidence intervals — to turn vibes into signals you can actually backtest.
Chapters
5
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6.1
Sigma Deviation Math
Z-scores, standard deviations, and how to know when a 3-sigma move is meaningful vs. fat-tail-as-usual.
LIVE
12 min
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6.2
Rolling Baselines
Why static thresholds break the moment the market regime shifts — and how to compute baselines that adapt.
LIVE
13 min
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6.3
Bayesian Updating in Trading Decisions
Prior belief, evidence, posterior. Worked SPY example with concrete numbers, beta-binomial conjugate priors for win-rate estimation, and how to avoid base-rate neglect.
LIVE
9 min
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6.4
Hypothesis Testing for Trading Strategies
Type I/II errors, p-values vs Bayes factors, the multiple-comparisons problem, Bonferroni and FDR control — why most published strategies don’t replicate.
LIVE
9 min
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6.5
Confidence Intervals & Options Pricing
1-sigma EM as 68% CI. Where Black-Scholes assumes normality and breaks. Pricing options against your private CI, sizing for the variance risk premium.
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9 min
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