I was wondering if there is a traders guide to the statistics of the market or individual equities when certain events occur or situations present itself. For example, the overall market will likely decline in the long run when we have an inverted yield curve because there is a 80% chance of recession. For an individual equity, a stock tends to gap up after earnings and trade down during the regular session.
Market Probabilities
- Thread starter drukes1234
- Start date
Autumn is approaching, which some refer to as "fall". In the spirit of the season, last weekend, two economists went duck hunting. In their blind, they saw a mallard spook and take off with wings flapping. One economist, Melvin, shot to the left, and the other, Marvin, shot to the right. When they averaged their results, why..........".they" hit the duck and feasted on an imaginary meal.
Probability works fine for coin flipping. Nice, neat, generic, binary with just two outcomes (unless you consider the possiblity of landing on it's edge).
Here in the real world, price changes vary in magntitude, and hence alter future probabilites, or shall we say, odds. Factor in intervention, including the PPT, and the human element, such as specialists and market makers; then stir in some media influence and cheap money, and the decision tree becomes rather loose.
Besides, the definition of a recession is debatable. Just ask Melvin. Or Marvin. Ditto for bear markets, etc.
Just so this post is semi-constructive, attached is a decison tree of the S&P 500 in terms of direction (NOT magnitude).
Probability works fine for coin flipping. Nice, neat, generic, binary with just two outcomes (unless you consider the possiblity of landing on it's edge).
Here in the real world, price changes vary in magntitude, and hence alter future probabilites, or shall we say, odds. Factor in intervention, including the PPT, and the human element, such as specialists and market makers; then stir in some media influence and cheap money, and the decision tree becomes rather loose.
Besides, the definition of a recession is debatable. Just ask Melvin. Or Marvin. Ditto for bear markets, etc.
Just so this post is semi-constructive, attached is a decison tree of the S&P 500 in terms of direction (NOT magnitude).
Ben Warwick does a lot of that stuff:
http://www.amazon.com/Event-Trading...=pd_bbs_1/002-6901482-5060867?ie=UTF8&s=books
I've also read of studies on probabilities based on earnings for specific stocks, and I've seen charts showing the stock before and after earneings of many quarters laid on top of each other, but forget where I've seen it. But it does exist, so google around a bit.
Cash