We need a model for planning any activity, starting with constructing a building to establishing a big industry. The principle behind setting up, running and modifying a business is a model simulation combining the chances or likelihood of achieving different targets. Once the likelihood of possible outcomes of all events is spread out using probability distribution, parameters for the functioning of the business in the planned direction are conceptualized and applied.
For example, you use a probability statistical model for a new financial policy to affect the general market trend, and you get a visual representation of the same as a curve. The peak of the curve is the condition where you can achieve maximum results. Let your company function in the production of agricultural machinery and resources. By constructing a model predicting the sales of each type of your product based on the climate change, you infer the best time to maximize production, characterized by the peak and the adverse time calling for precautionary measures, characterized by tails.
An industry which runs on the probability distribution prediction alone
Unlike other mainstream business activities which focus their modeling based on the sales and marketing of their products and services, there is one sector which actually banks on the probability decisions. This is the trading market, where investors trade on the probability of the fluctuations in pricing and market trends, under all circumstances of independent trading and trading via Crypto Code software or other online platforms.
Consider that as an investor, you are on the lookout for a worthy equity fund for short-term investment and trading. If you are experienced enough to carry out the risk and profit analysis on your own, you will be looking into the performance history of the fund, its current market value, number of takers, situations influencing it positively or negatively and future plans. All these factors are put to use in the decision-making process to determine whether it will give you financial benefit or not. The same strategy may be applied by a retail broker too in providing his financial advice to the client.
Alternatively, if you solicit the assistance of a trading broker or software, the algorithm uses theories including the behavioral finance concepts in probability and random distribution to the relevant data and interprets the data, both in descriptive and pictorial forms and constructs the decision tree. Even regulation of trading markets employs probability in the validation tools.
If mathematics gives us an unsolvable headache in grasping and understanding, a casino game of chance entirely played on probability assumptions elucidates the optimism of overcoming the fear of failure.