Tools: Why Expected Value Is Not Enough In Production Trading Systems

Expected value optimization fails in production because it ignores the path to profitability—our system had positive EV but bled capital through occasional wins followed by persistent small losses. We fixed it by implementing CVaR constraints, fractional Kelly position sizing (25% of theoretical), and robust optimization that assumes our model is wrong, trading lower theoretical returns for survival and consistent compounding.

Source: HackerNoon