{"id":51932,"date":"2016-04-10T03:26:40","date_gmt":"2016-04-10T10:26:40","guid":{"rendered":"https:\/\/brookstradingcourse.com\/?p=51932"},"modified":"2018-03-25T03:14:22","modified_gmt":"2018-03-25T10:14:22","slug":"trading-statistics-probabilities","status":"publish","type":"post","link":"https:\/\/www.brookstradingcourse.com\/pt-br\/ask-al\/trading-statistics-probabilities\/","title":{"rendered":"Ask Al: Trading statistics &#038; probabilities"},"content":{"rendered":"<h2>Trading statistics &amp; probabilities<br \/>\n BPA trading room Q&amp;A: March 18, 2015<\/h2>\n<p class=\"content-box-green\">Question: How do you determine the probabilities that are in your books, your trading manual, and that you speak of daily? For example, the probability of 10 bars 2 legs after a wedge. Or if the first five days are negative: January is down 60 percent of the time instead of only 30 percent of the time. Do you have a software package that helps determine these from historical data?<br \/>\n <em>Video duration: 5min 27sec<\/em><\/p>\n<div style='position:relative;height:0;padding-bottom:56.25%'><iframe class='sproutvideo-player' src='\/\/videos.sproutvideo.com\/embed\/489adfbb1318e7c4c0\/187986f6e8e00bf0?playerTheme=dark&amp;playerColor=' style='position:absolute;width:100%;height:100%;left:0;top:0' frameborder='0' allowfullscreen><\/iframe><\/div>\n<p><\/p>\n<p class=\"caption\">You can also view this video on <a href=\"https:\/\/youtu.be\/TOuhg-wrupg\" target=\"_blank\" rel=\"noopener\">Al&#8217;s YouTube Channel<\/a> if needed.<\/p>\n<h3>Trading Statistics<\/h3>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"\/wp-content\/uploads\/2016\/04\/secret-handshake.jpg\" alt=\"Secret Handshake\" width=\"276\" height=\"182\" class=\"alignleft size-full wp-image-51941\" title=\"\">No, but you\u2019re bringing up two different things. Ok, let me deal with the second one first, the business about if the first five days of January are negative, January\u2019s down 60 percent of the time instead of only 35 percent of the time &#8212; all traders know that, right? So those calendar things that I talk about, like 4th of July being up and Christmas being up, and then certain months being up, those are things that I just picked up over the years from what I think are reliable sources.\u00a0 I never make trades based upon them, but it\u2019s kind of like if you\u2019re in a fraternity or sorority and you have a <a href=\"https:\/\/en.wikipedia.org\/wiki\/Secret_handshake\" target=\"_blank\" rel=\"noopener\">secret handshake<\/a>, kind of like \u201cWelcome to the club.\u00a0 You\u2019re now a trader,\u201d and those are some of the secret handshakes that traders have.\u00a0 They know stuff like that.\u00a0<\/p>\n<p>If you have a really big bull trend for two, three, four days, you expect the market to trade down for a day and a half.\u00a0 There are a whole bunch of little things like that, that traders know.\u00a0 It\u2019s just fun.\u00a0 To me, it\u2019s just fun and stuff like that.<\/p>\n<h3>How do we determine probabilities<\/h3>\n<p>Now, the first half of your question &#8212; how do you determine the probability of things like 10 bars 2 legs after a wedge &#8212; that is much more subjective.\u00a0 And also, I talk about any time you\u2019re in a channel &#8212; anytime you\u2019re in a channel and you break to the downside, you have a 30 percent chance of the breakout being successful, a 70 percent chance of it reversing within a few bars and going up to the top of the channel.\u00a0 And do I know it\u2019s 70 percent?\u00a0 No.\u00a0 Have I tested it?\u00a0 No.\u00a0 It\u2019s just my guideline.\u00a0 I\u2019m drawing a contrast between that and 60 percent.\u00a0 If I say most anything\u2019s about 40 to 60 percent; strong breakouts, probably somewhere around 80 percent that there will be follow-through.\u00a0 But I\u2019m trying to say that we have a reasonable looking wedge or if you have a reasonable looking channel, especially one continuing within parallel lines, the reality is more than 60 percent of the breakout attempts will fail and the market will reverse.<\/p>\n<p><a href=\"\/wp-content\/uploads\/2016\/04\/es-chart-ask-al-54-probabilities-60minute.png\" rel=\"attachment wp-att-51938\" target=\"_blank\"><img loading=\"lazy\" decoding=\"async\" src=\"\/wp-content\/uploads\/2016\/04\/es-chart-ask-al-54-probabilities-60minute-300x161.png\" alt=\"ES Chart Ask Al 54 Probabilities 60minute\" width=\"300\" height=\"161\" class=\"alignleft size-medium wp-image-51938\" title=\"\" srcset=\"https:\/\/www.brookstradingcourse.com\/wp-content\/uploads\/2016\/04\/es-chart-ask-al-54-probabilities-60minute-300x161.png 300w, https:\/\/www.brookstradingcourse.com\/wp-content\/uploads\/2016\/04\/es-chart-ask-al-54-probabilities-60minute-768x411.png 768w, https:\/\/www.brookstradingcourse.com\/wp-content\/uploads\/2016\/04\/es-chart-ask-al-54-probabilities-60minute-600x321.png 600w, https:\/\/www.brookstradingcourse.com\/wp-content\/uploads\/2016\/04\/es-chart-ask-al-54-probabilities-60minute.png 1276w\" sizes=\"auto, (max-width: 300px) 100vw, 300px\" \/><\/a>I talked about that on the 60-minute chart over here.\u00a0 I said that this is a bear channel; you can call it a wedge; doesn\u2019t matter what you call it.\u00a0 Ok. But to me, this looks fairly \u201cwedgie\u201d in an oversold market, right? In a bear breakout below the bottom of a channel &#8212; 70 percent chance it\u2019s going to reverse instead of breaking out to the downside and starting a new leg down.\u00a0 Normally, it reverses within one, two, three, four, five bars.\u00a0 Here, it took about 10 bars before it reversed, but unless the bears get that strong downside breakout, I\u2019m going to assume the breakout will fail.\u00a0 Then you also hear me talk about microchannels, if you start to get 10 bars in a row, like on the 60-minute chart, in a microchannel.\u00a0 Like here, the first breakout will be sold, but the second one will be bought, right?\u00a0 So I have statistical stuff just from my own experience.\u00a0 And then here, once you start to get whatever it was, 11 bars without a pullback, 60-minute chart, the odds are high that the first reversal down will be bought, but that you\u2019ll soon enter a trading range.<\/p>\n<p><a href=\"\/wp-content\/uploads\/2016\/04\/es-chart-ask-al-54-probabilities-monthly.png\" rel=\"attachment wp-att-51939\" target=\"_blank\"><img loading=\"lazy\" decoding=\"async\" src=\"\/wp-content\/uploads\/2016\/04\/es-chart-ask-al-54-probabilities-monthly-300x157.png\" alt=\"ES Chart Ask Al 54 Probabilities Monthly\" width=\"300\" height=\"157\" class=\"alignleft size-medium wp-image-51939\" title=\"\" srcset=\"https:\/\/www.brookstradingcourse.com\/wp-content\/uploads\/2016\/04\/es-chart-ask-al-54-probabilities-monthly-300x157.png 300w, https:\/\/www.brookstradingcourse.com\/wp-content\/uploads\/2016\/04\/es-chart-ask-al-54-probabilities-monthly-768x401.png 768w, https:\/\/www.brookstradingcourse.com\/wp-content\/uploads\/2016\/04\/es-chart-ask-al-54-probabilities-monthly-600x313.png 600w, https:\/\/www.brookstradingcourse.com\/wp-content\/uploads\/2016\/04\/es-chart-ask-al-54-probabilities-monthly.png 1278w\" sizes=\"auto, (max-width: 300px) 100vw, 300px\" \/><\/a>On my monthly blog, I keep talking about this monthly chart.\u00a0 We have 33 months without touching the moving average.\u00a0 That\u2019s only happened twice before in the past 50 years.\u00a0 How do I know that?\u00a0 I put up the cash chart and scrolled back and counted how many times the market has been 31 bars away from the moving average, and it only happened twice before.\u00a0 Both times, the market continued away from the moving average with more bars; one time, I think 36 bars; the other time 44 bars.\u00a0 However, both times resulted in corrections.\u00a0 One time, I think 20 or 22 percent, and the other time 37 percent.<\/p>\n<p>So is this going to be different?\u00a0 Can we stay above the moving average 50 bars, 60 bars, 70 bars?\u00a0 Anything can happen, but chances are no.\u00a0 And when we start to get down to the moving average, will we have a 5 percent correction?\u00a0 Well, the past two times we were this overbought, we had a 20 percent and a 37 percent correction.\u00a0 So do I think it\u2019s more likely a 5 percent pullback or do I think it\u2019s more likely a 20 percent pullback?\u00a0 I think it\u2019s more likely a 20 percent pullback.<\/p>\n<p>So some of it is how many months away from the moving average for the monthly chart.\u00a0 Other things, they\u2019re just stuff that I\u2019ve picked up over the years that I\u2019ve heard people on television say that I\u2019ve trusted. They\u2019ve tested it; some of it I\u2019ve tested myself to determine that it was factual.\u00a0 You can do testing with TradeStation and other software products as well.\u00a0 And then some of it is purely subjective.\u00a0 Pick a number &#8212; 80 percent of breakouts fail and 80 percent of trend reversals fail, and that is subjective because what is a breakout?\u00a0 What is a trend reversal?\u00a0 And that is all subjective.\u00a0 But in general, the point that I\u2019m trying to make is if you\u2019re in a trading range, you should not be buying highs, you should not be selling lows, because chances are you\u2019ll lose money.<\/p>\n<p><em>Al Brooks<\/em><\/p>\n<p><a title=\"Al Brooks&#039; trading room\" href=\"https:\/\/www.brookstradingcourse.com\/online-day-trading-room\/\">Information on Al&#8217;s Online day trading room<\/a><\/p>\n<hr \/>\n","protected":false},"excerpt":{"rendered":"<p>Trading statistics &amp; probabilities BPA trading room Q&amp;A: March 18, 2015 Question: How do you determine the probabilities that are in your books, your trading manual, and that you speak of daily? For example, the probability of 10 bars 2 legs after a wedge. Or if the first five days are negative: January is down [&hellip;]<\/p>\n","protected":false},"author":6,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"","footnotes":""},"categories":[159],"tags":[],"class_list":{"0":"post-51932","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-ask-al","7":"entry","8":"has-post-thumbnail","9":"override"},"featured_image_src":null,"author_info":{"display_name":"BTC Admin","author_link":"https:\/\/www.brookstradingcourse.com\/pt-br\/author\/richardhk\/"},"_links":{"self":[{"href":"https:\/\/www.brookstradingcourse.com\/pt-br\/wp-json\/wp\/v2\/posts\/51932","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.brookstradingcourse.com\/pt-br\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.brookstradingcourse.com\/pt-br\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.brookstradingcourse.com\/pt-br\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/www.brookstradingcourse.com\/pt-br\/wp-json\/wp\/v2\/comments?post=51932"}],"version-history":[{"count":0,"href":"https:\/\/www.brookstradingcourse.com\/pt-br\/wp-json\/wp\/v2\/posts\/51932\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.brookstradingcourse.com\/pt-br\/wp-json\/wp\/v2\/media?parent=51932"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.brookstradingcourse.com\/pt-br\/wp-json\/wp\/v2\/categories?post=51932"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.brookstradingcourse.com\/pt-br\/wp-json\/wp\/v2\/tags?post=51932"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}