Control chart limits form statistical thresholds, usually at ±3 standard deviations around a process’s average, defining expected variation. They distinguish random fluctuations from meaningful changes. When data surpass these limits, it suggests an abnormal shift has occurred, guiding analysts to intervene or investigate promptly, thereby maintaining consistent control and process reliability.
Opponent Process theory describes market cycles driven by two opposing conditions: maximum risk, present during periods of excessive optimism causing asset prices to become severely overvalued; and maximum opportunity, emerging amid widespread pessimism resulting in deep undervaluation. These extremes cyclically reverse, enabling informed investors to profitably navigate between risk and opportunity.
Asymmetrical risk/reward describes investment situations offering uneven potential outcomes, such as risking $1 to potentially gain $5. This imbalance, characterized by limited downside and substantial upside, attracts investors because infrequent successes easily offset multiple small losses. Over time, consistently pursuing these favorable risk-to-reward scenarios enhances portfolio returns.