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Hi Anthony:
lets say I want to know the stats following a 3 down day pattern:
3daydn = 20
next day up following pattern= 18.
next down days following pattern =2
So far I now know that there's a 90% chance the next day will be up
following 3 down days. Closing price to closing price.
The stats are from the closing price on the last day of the pattern to
the closing price of the next day. You could also have the option of
buying at the next days open if you want but I didn't want to make
this too complex.
The average gain of the day after the pattern is $2.75. This is just
averaging the gains of those 18 up days.
The highest gain out of the 18 was $3.25.(close to close)
The lowest gain was $1.25.
Now I know there's a 90% probability of making atleast $1.25 the day
after the pattern. Now you can continue this method up to 5 days
after the pattern.
Or to make it easier, you could instead just show the average
gain/loss, highest gain, highest loss etc etc by holding the trade
1day, 2days, 3days, 4days and 5 days after the pattern. Measurable
from close of the 3 day down pattern to close of day1, from the close
of the pattern to the close of day2, close of pattern to close of day
3, etc etc.
Hope this helps,
Dominick
Down day following pattern = 2
average loss out of the 2 = $0.75
Highest loss = $1.50
Lowest loss = $0.25
You would then continue
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