Calibration
A forecaster is well calibrated when things they call '30% likely' happen about 30% of the time, and things they call '90% likely' happen about 90% of the time.
In plain English
A single probability forecast can't be right or wrong: 30% rain and then rain is not a mistake. Calibration is checked over many forecasts. Group them by the percentage given and count how often each group came true. If the 30% days were wet about 3 times in 10, the forecaster is calibrated.
Uncle Gary explains
Uncle Gary says he's '100% sure' about every football result. Over a season, his 100% predictions come true 54% of the time. He is very confident and badly calibrated, which is a common combination.
Why it matters for your money
Any strategy or signal quoted with a percentage, like '70% of the time this goes up', has to be checked the same way: over hundreds of cases, not one trade.
Where we tested it
Related terms
All glossary terms. Educational content, not financial advice.