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Five months down
- Thread starter paden
- Start date
Quote from trackstar:
BEAR MARKETS DONT END UNTIL NO ONE IS WILLING TO BUY, STOP TRYING TO PICK A BOTTOM. LET THE DAMN THING FORM AND RIDE IT BACK UP.
Uhm, not picking a bottom. Even bear markets have rallies, they don't go straight down.
I never said end of March would be end of bear market.
"Thus, there is a 2.7% chance of us ending the month down? "
no. this is one of the most popular fallacies amongst retail traders.
just because there has been a statistical likelihood X of something happening in the past, it does NOT necessarily follow that that same likelihood is still the same
let's say i wanted to develop a trade bias for leap days (feb 29) like we just had, and i found that 3/4 of leap days were up days in the S&P . note: this is not the case, i'm just giving an example.
does this mean there's a 75% chance that the market will be up on a leap day
of COURSE NOT.
no. this is one of the most popular fallacies amongst retail traders.
just because there has been a statistical likelihood X of something happening in the past, it does NOT necessarily follow that that same likelihood is still the same
let's say i wanted to develop a trade bias for leap days (feb 29) like we just had, and i found that 3/4 of leap days were up days in the S&P . note: this is not the case, i'm just giving an example.
does this mean there's a 75% chance that the market will be up on a leap day
of COURSE NOT.
Quote from paden:
Back to 1900, from what I found, the s&p had four time periods where it was down five months in a row:
1937
1942
1946
1974
Not even 2002
However, the dow adds three time periods to this:
1966
1977
2002
So, at most, 7 times since 1900 has a major index gone down five months in a row.
Thus, there is a 2.7% chance of us ending the month down? (257 five month periods over the last 1287 months?) My math is probably off, but it seems close. I am willing to take a lsmall long position on the next gap down and hold until end of month.
Once it has already happened, you cannot use "2.7%" as the probability. The 4 months in a row have already occurred.
It is like the average newborn male will probably live to be 77 in America. But once he is already 76, he will probably live well into his 80s. That is called actuarials.
And you cannot look over the past century or so, and think this market has to follow history. It might drop for 16 straight months and wipe you out.
good points.
Just like in roulette you can get 100 reds in a row.does that increase the odds of the next one being black?no, its still 50/50.
however, 2008 is different from the 1940s or 1970s.internet, cp's etc make info move around a lot faster.
In my view that translates into short and sharp bear markets, and prolonged bull markets, basically a continuation of what we have seen the past 4 years.
Just like in roulette you can get 100 reds in a row.does that increase the odds of the next one being black?no, its still 50/50.
however, 2008 is different from the 1940s or 1970s.internet, cp's etc make info move around a lot faster.
In my view that translates into short and sharp bear markets, and prolonged bull markets, basically a continuation of what we have seen the past 4 years.
i find this a very interesting statistic: 50/50 stock-bond allocation returned 80% of being fully invested in the market with only half the risk from 1924 to 2004:
https://www.myfloridadeferredcomp.com/SOFweb/RFTP/Art of Asset Allocation/historical_performance.htm
https://www.myfloridadeferredcomp.com/SOFweb/RFTP/Art of Asset Allocation/historical_performance.htm
Quote from TraderZones:
Once it has already happened, you cannot use "2.7%" as the probability. The 4 months in a row have already occurred.
It is like the average newborn male will probably live to be 77 in America. But once he is already 76, he will probably live well into his 80s. That is called actuarials.
And you cannot look over the past century or so, and think this market has to follow history. It might drop for 16 straight months and wipe you out.
True, very true... That is why I posted the thought, as I tend to get tunnel vision in my thoughts. Also, why I would only put on a small position when considering this... certainly not risk much.