Help with a Rule of Thumb Statistic

[frcrilly]

Hi All,

I’ve come across a rule of thumb statistic that 85% of the time, stocks tend to role sideways. This would mean 15% of the time, stocks tend to trend either upwards or downwards.

My question is, would this imply stocks trend upwards 7.5% of the time and likewise downwards 7.5% of the time, or does this split work out differently in practice?

If anyone has ideas on how this 15% should be split between upwards and downwards, I am all ears.

Thanks in Advance for all responses.

(I’m aware it’s a general rule of thumb with no right or wrong answer that shouldn’t be taken as gospel).

 

[nazzdack]

Quote from frcrilly:
----85% of the time, stocks tend to roll sideways.
----15% of the time, stocks tend to trend.....
----would this imply stocks trend upwards 7.5% of the time and likewise downwards 7.5% of the time, or does this split work out differently in practice?
----any ideas on how this 15% should be split between upwards and downwards....

1) The 85% "number" depends on your time frame.
2) For short-term / intra-day trading, the market is essentially "trending" in one direction or the other all of the time.
3) With trends, you expect uptrends to be slower and downtrends to be faster.
4) The market spends more time uptrending but that movement can be retraced quickly by downtrends, depending on your time frame.

 

[MTE]

Here's another rule of thumb for you, which actually answers your question:

Markets fall twice as fast as they go up.