Let's talk probabilities.

Jaan (or anyone else)

What software tools do you use to do probability studies?

I have fooled around with simple ones in Excell, but I am guessing that is not the most efficient way to do it.

Thanks

 

There is an excellent book published by Bulkowski in which he beaks down statistically the probabilities of many classic chart patterns such as; flags, wedges, H & S's, cup w/handles,etc etc ......

Encyclopedia of chart patterns....

 

The two patterns that I've seen work over time are:

1. market tend to go up the last few days of the month and the first few days of the new month.

2. sectors that had a good month, tends to be extra strong the last week of the month and quarter.

 

Just for fun I did a little study on the theory about; "85% of the time the stock will move higher the next day if the close is within the highest 10% of that day's trading range"
I used Yahoo data on the S&P 100 and had over 500,000 days of data. The findings are:

Next day high
......Close / range.......>close.........@ close........<close

.....Close @ high.........71.4%.........16.8%........11.8%
.....9 to .999999.........82.2%...........5.8%........12.0%
.....5 to .9...................79.2%...........9.8%........11.0%
.....1 to .5...................79.1%...........9.2%........11.7%
.....000001 to .1.........82.4%...........5.2%........12.4%
.....Close @ low..........82.5%...........8.5%..........9.0%

Next day low
.................................<close........@ close.........>close

.....Close @ high..........81.8%.......8.3%.............9.9%
.....9 to .99999............81.2%.......4.9%............13.9%
......5 to .9...................78.6%.......8.5%............12.9%
......1 to .5...................78.5%......10.2%...........11.3%
......00001 to .1...........81.1%.......5.4%............16.5%
......Close @ low..........71.1%......16.5%...........12.4%

Hope this proves interesting! jj
Had to edit table, hope this works

 

Instead of trying to edit again, I'll explain the headings. The first post had numbers all over the page.
The first colum is where the close lies within the range.
The second column is when the next days high is greater than the close.
The 3rd column is when the next days high is the same as the close.
The 4th column is when the next days high is lower than the close.
Reverse these headings for the nexr day's low in the 2nd group.
Hope this helps JJ

 

well, i use custom tools. you see, i'm a co-owner of a software house, so part of our "trading business plan" has been to convert our programming expertise (which we have plenty) to trading profits.

- jaan

 

heheh, somehow i believe you are overestimating the age of the stock market

- jaan

 

Trade whats moving... you don't need probabilities to see whats moving.

 

Sorry Jaan, I should have said I used the 100 stocks that make up the S&P 100 index.
jj

 

For the same reason outlined above...you would lose most of the time, and probably not have enough "staying power" to keep the positions long enough for them to turn profitable.