I have noticed a lot of people in here fighting trends... A lot of people don't have the slightest grasp of the statistics of market movement. I decided to share with you this simple way of analyzing probability. I don't actually use this when trading so it won't hurt me to share it. However, I do use it to review the overall situation.
First, let me give you cheat-sheets for compounding probabilities. A "OR" compound allows you to compound the estimated probability of an event like Mean Return. A "AND" compound allows you to estimate the compound the probability of two separate events like price testing a half ATR under mean and a half ATR above mean in the same candle.
Here are the Cheatsheets, next post is the first lesson.
Probability || Compounds
90% Probability 2xOR Compound = 99%
80% Probability 2xOR Compound = 96%
70% Probability 2xOR Compound = 91%
60% Probability 2xOR Compound = 84%
50% Probability 2xOR Compound = 75%
40% Probability 2xOR Compound = 64%
30% Probability 2xOR Compound = 51%
20% Probability 2xOR Compound = 36%
10% Probability 2xOR Compound = 19%
90% Probability 3xOR Compound = 99.9%
80% Probability 3xOR Compound = 99.2%
70% Probability 3xOR Compound = 97.3%
60% Probability 3xOR Compound = 93.6%
50% Probability 3xOR Compound = 87.5%
40% Probability 3xOR Compound = 78.4%
30% Probability 3xOR Compound = 65.7%
20% Probability 3xOR Compound = 44.8%
10% Probability 3xOR Compound = 27.1%
90% Probability 4xOR Compound = 99.99%
80% Probability 4xOR Compound = 99.84%
70% Probability 4xOR Compound = 99.19%
60% Probability 4xOR Compound = 97.44%
50% Probability 4xOR Compound = 93.75%
40% Probability 4xOR Compound = 87.04%
30% Probability 4xOR Compound = 75.99%
20% Probability 4xOR Compound = 59.04%
10% Probability 4xOR Compound = 34.39%
90% Probability 5xOR Compound = 99.999%
80% Probability 5xOR Compound = 99.968%
70% Probability 5xOR Compound = 99.757%
60% Probability 5xOR Compound = 98.976%
50% Probability 5xOR Compound = 96.875%
40% Probability 5xOR Compound = 92.224%
30% Probability 5xOR Compound = 83.193%
20% Probability 5xOR Compound = 67.232%
10% Probability 5xOR Compound = 40.951%
Probability && Compounds
90% Probability 2xAND Compound = 81%
90% Probability 3xAND Compound = 72.9%
90% Probability 4xAND Compound = 65.61%
90% Probability 5xAND Compound = 59.049%
80% Probability 2xAND Compound = 64%
80% Probability 3xAND Compound = 51.2%
80% Probability 4xAND Compound = 40.96%
80% Probability 5xAND Compound = 32.768%
70% Probability 2xAND Compound = 49%
70% Probability 3xAND Compound = 34.3%
70% Probability 4xAND Compound = 24.01%
70% Probability 5xAND Compound = 16.807%
60% Probability 2xAND Compound = 36%
60% Probability 3xAND Compound = 21.6%
60% Probability 4xAND Compound = 12.96%
60% Probability 5xAND Compound = 7.776%
50% Probability 2xAND Compound = 25%
50% Probability 3xAND Compound = 12.5%
50% Probability 4xAND Compound = 6.25%
50% Probability 5xAND Compound = 3.125%
First, let me give you cheat-sheets for compounding probabilities. A "OR" compound allows you to compound the estimated probability of an event like Mean Return. A "AND" compound allows you to estimate the compound the probability of two separate events like price testing a half ATR under mean and a half ATR above mean in the same candle.
Here are the Cheatsheets, next post is the first lesson.
Probability || Compounds
90% Probability 2xOR Compound = 99%
80% Probability 2xOR Compound = 96%
70% Probability 2xOR Compound = 91%
60% Probability 2xOR Compound = 84%
50% Probability 2xOR Compound = 75%
40% Probability 2xOR Compound = 64%
30% Probability 2xOR Compound = 51%
20% Probability 2xOR Compound = 36%
10% Probability 2xOR Compound = 19%
90% Probability 3xOR Compound = 99.9%
80% Probability 3xOR Compound = 99.2%
70% Probability 3xOR Compound = 97.3%
60% Probability 3xOR Compound = 93.6%
50% Probability 3xOR Compound = 87.5%
40% Probability 3xOR Compound = 78.4%
30% Probability 3xOR Compound = 65.7%
20% Probability 3xOR Compound = 44.8%
10% Probability 3xOR Compound = 27.1%
90% Probability 4xOR Compound = 99.99%
80% Probability 4xOR Compound = 99.84%
70% Probability 4xOR Compound = 99.19%
60% Probability 4xOR Compound = 97.44%
50% Probability 4xOR Compound = 93.75%
40% Probability 4xOR Compound = 87.04%
30% Probability 4xOR Compound = 75.99%
20% Probability 4xOR Compound = 59.04%
10% Probability 4xOR Compound = 34.39%
90% Probability 5xOR Compound = 99.999%
80% Probability 5xOR Compound = 99.968%
70% Probability 5xOR Compound = 99.757%
60% Probability 5xOR Compound = 98.976%
50% Probability 5xOR Compound = 96.875%
40% Probability 5xOR Compound = 92.224%
30% Probability 5xOR Compound = 83.193%
20% Probability 5xOR Compound = 67.232%
10% Probability 5xOR Compound = 40.951%
Probability && Compounds
90% Probability 2xAND Compound = 81%
90% Probability 3xAND Compound = 72.9%
90% Probability 4xAND Compound = 65.61%
90% Probability 5xAND Compound = 59.049%
80% Probability 2xAND Compound = 64%
80% Probability 3xAND Compound = 51.2%
80% Probability 4xAND Compound = 40.96%
80% Probability 5xAND Compound = 32.768%
70% Probability 2xAND Compound = 49%
70% Probability 3xAND Compound = 34.3%
70% Probability 4xAND Compound = 24.01%
70% Probability 5xAND Compound = 16.807%
60% Probability 2xAND Compound = 36%
60% Probability 3xAND Compound = 21.6%
60% Probability 4xAND Compound = 12.96%
60% Probability 5xAND Compound = 7.776%
50% Probability 2xAND Compound = 25%
50% Probability 3xAND Compound = 12.5%
50% Probability 4xAND Compound = 6.25%
50% Probability 5xAND Compound = 3.125%
"Don't fear a bubble until it starts to burst."