Mon, Dec 29, 2014, 7:12 AM EST - U.S. Markets open in 2 hrs 18 mins


% | $
Quotes you view appear here for quick access.

American Capital Agency Corp. Message Board

  • mrwizard9090 mrwizard9090 Mar 22, 2013 12:43 PM Flag

    Probability trading, continued

    the reply button is not working correctly, so....

    we are going to have to agree to disagree on my #6. a true probability method does not allow you to delete balls of any color, no matter what happens. otherwise you would also have to delete a successful ball for every success. by the same token, an 80% success rate applies to each iteration. the complement, a 20% failure rate, when serially ANDed becomes a truly rare event very quickly. but it still has the same 20% probability each time. run a series of 80% prob 10,000 times and see how many long strings of bad results show up. there is a way to calculate the chances of say, 5 bads in a row. surprisingly high when you are playing with real money.

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • MrWizard,

      My example was for a defined period in the future that one is predicting (from the historic probability of 80%), a future 80% result. For 24 months in the future our model predicts 80%. Therefore if a hypothetical 80% result is "Given", then each loss(20%) will, in fact make your next cycle have a probability of less than 20%.

      Yes, if "Given" an infinite future time period to get a 20% loss showing up, you could have years of consecutive losses and still retain your 20% loss rate. The difference between that hypothetical and mine is that we know from history that the 20% loss rate "occurs" historically over 24 cycles, not infinite cycles.

      Therefore if we are using history as a probability statistic for the future(same time period...I.e. 24 months) then the ball analogy has to be statistically true. So with our "Given" (20% loss over 24 cycles) each trade after a loss, is that much closer to a win over that defined time period.



    • Nice up trend today gotta like it.

22.30+0.16(+0.72%)Dec 26 4:00 PMEST

Trending Tickers

Trending Tickers features significant U.S. stocks showing the most dramatic increase in user interest in Yahoo Finance in the previous hour over historic norms. The list is limited to those equities which trade at least 100,000 shares on an average day and have a market cap of more than $300 million.
Virgin America Inc.
NASDAQFri, Dec 26, 2014 4:00 PM EST
Belmond Ltd.
NYSEFri, Dec 26, 2014 4:01 PM EST
Calithera Biosciences, Inc.
NASDAQFri, Dec 26, 2014 4:00 PM EST