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Thanks Robert.
and with your answer, now I remember why i flunked
probability, and chose a path requiring less math.
Psychology and Criminology did not require the use of
my fingers to determine my success, or the lack there of.
thanks for the lesson.
jeff
--- In realtraders@xxxx, "Robert Baker" <rbaker@xxxx> wrote:
> J
>
> I don't presume to answer for whoever wrote the message you are
referring to but you can only compute a probability based on the
number of possible outcomes such as the two sides of a coin, or in
the case of markets, from some historical perspective. As to the
time period that, of course, would have a significant impact on
whether the probability had any practical value. The longer the
better would be a general rule. My assumption, which I may have
misconstrued, is that there is a 60% probability that the trade will
reach a target equal to the risk (if it is a 1:1 reward ratio) before
it retraces to the stop point.
>
> As to forecasting probabilities the general formula would be
something like this.
>
> If the risk reward ratio is 1:1 then that means that for every $1
risk you take you would expect to receive a $1 return. (Risk, in
this context, is not how much you invest in the trade but how much
money you actually lose if your stop loss is hit.) Now if the
probability of that happening is 60% then 6 of every 10 trades would
win $1 and 4 of every ten would lose $1. Thus you would net $2 or
20% from which you would pay yourself, your broker, your expenses,
and your government. The formula would be as follows:
>
> probability of success (p)
> expected gain (G)
> probability of loss (p)
> expected risk (L)
>
> (p*G) - (p*L) = return on investment
>
> in the case above:
>
> (.6*1) - (.4*1) = .2
>
> thus you clear 20 cents on every dollar you risk.
>
> As for support and resistance discussions I plead special ignorance.
>
> b
> ----- Original Message -----
> From: jeff97_98_1998
> To: realtraders@xxxx
> Sent: Sunday, July 07, 2002 10:03
> Subject: [RT] Re: Bear Market ?
>
>
> Not Joking,
>
> How does one compute a 60% probability of a market level
> being achieved? And in what time period? And with
> what amount of drawdown?
>
> Why not a 100% probability, given enough time?
>
> What is used to forecast probability?
> I flunked statistics and probability in school,
> so this subject is quite confusing to me.
>
> Also about support and resistance.
>
> How many support levels has the Nasdaq violated
> since 5000? So where was the support?
> If you breach 10 support levels, and bounce off the
> eleventh, does that prove support levels actually
> are tradeable?
>
> thanks,
>
> jeff
>
>
>
>
> --- In realtraders@xxxx, "ira" <irat@xxxx> wrote:
> > Some interesting things have occurred on the charts with
Wednesday
> and Fridays numbers. There is nothing in price that has voided
the
> down trend in the indexes and the rally prices are due for a
> retracement, but I would be careful about going short into a
> retracement of this rally. There appears to be a 60% probability
> that the Nasdaq composite could get to 1500, the 100 to 1170, the
S&P
> to 1050 and the DOW to 10,000. There are some strong resistance
> points prior to reaching these numbers, but they are there. So,
if
> you are going to short the first thing on Monday, it may pay to
have
> a safety net somewhere. Good trading, Ira.
>
>
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