Questions How to Get Started Trading with Probabilities

[NoDoji]

Quote from bulat:

Doesnt this mean that a typical setup that you identify shows up around 25 times per day? Or approximately every 13 minutes during the trading day. Sounds quite high.

I trade futures, so I can test setups through a longer session than the normal US stock trading session of 6 1/2 hours. The start of the European session provides enough price movement to test tactics during that time as well.

Keep in mind I'm a scalper, I rarely hold through retraces, so the market offers many opportunities daily.

I only have two core setups in my trading plan at this time.

That doesn't mean I don't trade other setups, I just haven't done enough research on the other ones to be able to tell you what the probabilities for them are other than "good".

 

[Visaria]

Quote from panzerman:

Example: (Assumes Gaussian return distribution with no skew or kurtosis)

Calculate the future price X that is "x" standard deviations from the current price S.

X = exp(sigma*t*x)*S

t = sqrt(365/365) = 1
sigma = 11.61%
S = 444.27
x = 1

therefore:

X = exp(0.1161*1*1)*444.27 = 498.95

btw, 1 standard deviation gives an 84% probability of the price being below the future price in one year. If you want a 90% probability, use 1.27 standard deviations. Use the formula =normsdist(1.27) in Excel to get the percent.

Why have you used a normal distribution as your assumption?

 

[Visaria]

Quote from galvinlee888:

Advanced math in PhD itself won't help you to make money in market, but it gives you the ticket to join "real" firms(not those blood sucker prob firm) like GS and MS, you will learn "real" things there and real money.

I assume you no need this as you are able to make money by trading vanilla products, may be with some advanced patern or JH math model?

I refer you to NoDoji's 1st post in this thread. You need to do some thinking and do some work (as we all do)!

 

[panzerman]

Quote from Visaria:

Why have you used a normal distribution as your assumption?

It makes the math simple and tractable. Also, to calculate prices below the current price, use negative standard deviations. For example, to have a 90% probability of staying above a given result, use -1.27 std dev.

Warning: If you trade under the assumption of a pure Gaussian return distribution, sooner or later you will get your head handed to you.

 

[cornix]

Pattern recognition. Try to notice recurring behavior patterns of a chosen market(s). Then as you think you noticed something, test them, first back test, then forward test with different parameters to see if your assumption confirmed or disproved.

If confirmed, collect stats for all nuances of this pattern and construct trading system on that base.

Done.

 

[jack hershey]

Quote from cornix:

Pattern recognition. Try to notice recurring behavior patterns of a chosen market(s). Then as you think you noticed something, test them, first back test, then forward test with different parameters to see if your assumption confirmed or disproved.

If confirmed, collect stats for all nuances of this pattern and construct trading system on that base.

Done.

Amen.

So it all turns out to be set theory.

Dodd and Granville implied the paradigm as Dow thought up informing people with groups of stocks. Thus indexes.

Keynes supplied the paradigm theory. we got the Hypothesis Set and it is complete. From there of all things vectors became the Parametric Measure.

Sub tending this bulwark came the way to deal with the market variable non continuous functions. Check Mate for having Christmas every day. We thank Carnap for logic theory and Boole for his Algebra.

Independent variable has 11 elements all defined by math.

the independent variable drives the dependent variable which is used to make money in the form of price.

Making money is defined as price delta.

Price has 10 cases and they are NOT how trading signals are generated. Price "gates" and "kills" measurements (signals) on the independent variable indicator.

trends have three parts: end , middle, end.

MADA allows the mental routine to take laps and do Bar-By-Bar.

It replaces the betting and hoping of CW's fighter pilot OODA bullshit. Intuition is the weak sister of betting and hope.

The mind works with the senses to deduce.

eyes do: space, shapes, and movement of shapes.

the mind is built to have FULLY differentiated inference (long term memory) As in all endeavors this is done with PURPOSEFUL learning. reading is an example.

trading has three alphabets. 10 characters for price, 11 characters for volume and 35 in 10 subsets for End Effects.

56 characters like letters of the alphabet.

trends have middles and the V and P characters form "words".

But there is just one basic word called "The Pattern".

It gets done or it gets violated.

QED.

Right now we see the 16 drills not being done.

 

[tradingbug]

If you have time, could you elaborate on the depression context. Now that we have traded above pt 1 on the indexes, where does that leave us in the big picture? Is the inverted saucer no longer in play and instead of a depression, are we entering a period similiar to the 70s...stagflation? TIA

 

[jack hershey]

Quote from tradingbug:

If you have time, could you elaborate on the depression context. Now that we have traded above pt 1 on the indexes, where does that leave us in the big picture? Is the inverted saucer no longer in play and instead of a depression, are we entering a period similiar to the 70s...stagflation? TIA

LOL ..

Hi

I prepared my speech before open today. I was up in a B 17 on Sunday so I did check on the German exports (down 50% for near future.) and we continue to do buy backs to keep our debt market in operation. Nice tightrope.

Thanks for asking.

We are in a lat now (intraday) so I will follow up thoughtfully later.

I do the TA and I have to take this into account. There is no fudging.

My plan is to nail the next two quarters and be in cash or tangible non market values (3 homes, boat, etc).

I'll do a paper since we have a new number.

 

[Visaria]

Just put him on ignore and then you don't have to read his posts.

Simple.

Edit: please stop quoting him as well.

 

[Magna]

Jack is welcome to start his own thread where he may post bar by bar trading, and those interested can ask him questions. But this thread is a discussion about trading with probabilities so let's please stick to the topic. Thanks.