If you feel overwhelmed with investing right now... watch this video | OVTLYR University Lesson 10
Testing Ideas, Measuring Expectancy, and Finishing the Plan
This lesson brings everything together. The focus is no longer theory or rules in isolation. It is about testing ideas, measuring whether they work, and deciding what belongs in your trading plan. The common thread across the session is simple: if something works, the data will show it.
1. Trading Is a Series of Small Processes
Before reviewing plans, a routine is demonstrated:
● Close predictable positions when rules say to close them
● Check for exit signals
● Confirm no hidden risks
● Move on
When a plan exists, decisions are fast and unemotional.
Discipline removes mental clutter.
2. Predictable Income Trades (Dividend Reset Example)
A recurring dividend ETF was closed before the ex-dividend date and planned for re-entry after the reset.
Key ideas:
● Dividend drops are mechanical and predictable
● Exiting before the drop avoids unnecessary drawdowns
● Re-entry after reset improves capital efficiency
● Gains do not trigger wash sale rules
This is treated as a process, not a prediction.
3. Reviewing Active Trades the Same Way Every Time
Open positions were checked for:
● Sell signals
● EMA crosses
● Order blocks
● Earnings risk
● Gap-and-crap violations
No exceptions were made.
If nothing triggers, nothing is changed.
No opinions were added.
4. Backtesting Is How Confidence Is Built
Multiple students presented backtests, each starting with a question:
Three oil conditions were tested:
● Does this idea work?
● Does this filter help or hurt?
The consistent rule:
● Take every trade that meets the criteria
● Do not skip losers
● Do not cherry-pick
Backtesting is observation, not storytelling.
5. Expectancy Is the Only Number That Matters
Expectancy was calculated and reinforced repeatedly.
Two equivalent methods:
● (Average win × win rate) − (average loss × loss rate)
● Or simply averaging all trade outcomes together
If expectancy is positive, the strategy works over time.
If it is negative, it does not, regardless of how good it feels.
6. Characteristics of Winning vs Losing Trades
By reviewing trades in bulk, patterns emerge:
● Short trades are often losers
● Longer holds tend to produce outsized winners
● Value zones improve stability
● Trades into outlier blocks fail more often
● Overextended entries reduce expectancy
The goal is to do more of what works and less of what doesn’t.
7. Different Plans Can All Be Valid
Students presented very different approaches:
● EMA-based trend following
● Value zone analysis
● Long-term and short-term trend lines
● Seasonal market behavior
No single approach was labeled “best.”
The requirement is that it:
● Fits the trader
● Is backtested
● Has positive expectancy
If you don’t like a plan, you won’t follow it.
8. Building the Final Plan
By this point, the trading plan must include:
● A clear idea
● Defined entries
● Defined exits
● Risk limits
● Backtested expectancy
Anything not tested does not belong in the plan.
Key Outcome of This Lesson
Trading plans are not opinions.
They are built from:
● Questions
● Testing
● Data
● Repetition
Confidence comes from knowing the math works, even when individual trades fail.
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