General Topics
Markets
Technical Topics
Brokerage Firms
Community Lounge
Site Support

# Odds of predicting market direction

Discussion in 'Trading' started by runningman, Aug 18, 2009.

1. ### runningman

What are the odds of correctly predicting if the S&P will be higher or lower for 10 days in a row? 20 days in a row? What's the longest anyone has done? The ESPN "Beat the Streak" contest has me thinking along this line.

2. ### crash n burn

thats easy

considering an adge of .04p, each prediction will come at .54p of success. hence, 10 days is a row would have the awesome probability of .54^10 = .0021%, thats odds of <b>1:394</b>. isnt that nice?

20 days in a row? LMAO do the math

3. ### IronFist

Or.......

I generated this forecast at data point number 30(roughly) on X-axis. I've been updating the underlying price every week/two weeks since then. It's not exactly right for 10 out of 10 days straight, but you get the idea.

Just scroll down a bit, and click on the first attachment on the page.

Pizza out. -C.

5. ### panzerman

The actual odds are unknowable since there are too many variables to account for. One has to make assumptions, such as prices moving in a perfectly Gaussian manner. Those assumptions are almost always wrong.

Remember: An assumption is the root of all screwups.

It also depends on WHICH 10 days. There is a huge diff between "I will predict starting on date X" vs. "During a 4 year period, I had a winning streak of 10 days."

7. ### nonlinear5

About the same as the odds of flipping tails 10 times in a row.

8. ### nokomisjeff

I would check my math on that. The odds wouldn't be the same

9. ### Kassz007

I would think the odds would be better than flipping tails ten times. The odds of flipping tails ten times in a row would be 0.5^10. As a worst case scenario, you have a 50/50 chance of predicting market direction (up or down). If you happen to have some sort of edge, this would bring your odds to better than 50/50, thus better than 0.5^10.

Edit: Although unlikely, I suppose the odds of predicting market direction are worse than 50/50 considering the possibility of an exactly flat day.

10. ### runningman

So- working backwards, *if* you predict the market direction 10 days in a row, does that mean you have an edge, and can you calculate what that edge is?

#10     Aug 19, 2009
ET IS FREE BECAUSE OF THE FINANCIAL SUPPORT FROM THESE COMPANIES: