# How To Calculate Probabiltiy

**Lets say you've developed a trading system. Now you need to evaluate it to make sure the results are better than chance. You need to calculate the probablilty.**

A - total number highs and lows that occured during a the entire time period w - window width (2 days, 2 weeks, 2 months, 2 years etc.) t - total time window width you're analyzing in days B - number of Highs and Lows (or indicator cross'if thats what you watch for) observed during the time being analyzed K - Number of times the signal coincided with a price high or low (i.e. the number of 'hits' ) note* (K<=B) note* the asterick symbol below (*) implies multiplication Then P = Probaility = A*w / t N = multiplier = B! / (K! * (B-K)!) where: K! is K factorial; B! is B factorial etc. lets say K = 3 then K! = 3 * 2 * 1 = 6 p = N*(P^{K})*((1-P)^{(B-K)}) = total probability (probability that what is being observed is due to chance)