Trading Probability

Kiwi06 · #1 12-18-2008, 05:40 PM

I am building an experiment for trading here is the idea.

It came to me 3am so it's still quite raw the idea is to look at the historical data you can either have a Long or Short so we look back in history and from the open look either side for a 50 point price if there is and the occurrence is very high i.e. 90% of the time then add a point to the 50 pip so the system then look for 51 pip either side of the open continue until the occurrence hits our pre set Percentage once that is hit then see which has the higher probability of hitting that target either Long or Short.

I don't know how to seperate the Long and Short calculation as i will be adding more daily stats.

I have been attempting the formular for the Probability but i'm no good at this. Also I have not even attempted to do the target and adding of the point. I need to buy some books on Excel to help improve my lack of skills and hopefully give something back.

Any help would be great.

Regards

Kiwi

teylyn · #2 12-18-2008, 05:43 PM

Whoa...
Stream of consciousness writing never makes for good requirements specifications. Could you review your post and add the odd punctuation mark, mate?

Would go a long way in helping your readers understand what you want to do!

**shg** · #3 12-18-2008, 05:44 PM

What do you want the averages of? (That's the only part of the question and your workbook that I understand.)

Kiwi06 · #4 12-18-2008, 05:50 PM

Thanks guys and yes the odd punctuation mark would not go a miss.

Sorry about that.

The average for the High Diff and the average for the Low Diff.

Thanks

Kiwi

Kiwi06 · #5 12-18-2008, 05:56 PM

Sorry thats the average of the Longs only and the Shorts only.

On the sheet there are 4 Long so the average of those 4 High Diff figures.

Thanks

Kiwi

**shg** · #6 12-18-2008, 06:34 PM

=AVERAGE(IF($G$2:$G$16 = "Long", $E$2:$E$16))

Look at the columns it tests and adjust accordingly.

This is an array formula, meaning it MUST be confirmed with Ctrl+Shift+Enter, not just Enter. (With the cursor in the formula bar, hold down Ctrl and Shift, then press Enter.) You'll know you did it correctly if curly braces appear around the formula in the Formula Bar; you cannot type in the braces directly.

Kiwi06 · #7 12-19-2008, 03:23 AM

Thanks for that SHG

That's now working well thanks

I will continue to work on the probability problems

Kiwi

Kiwi06 · #8 12-19-2008, 11:23 AM

Problem 2) is how do I calculate the probability of the High Diff reaching the Start Target

Cheers

Kiwi

**shg** · #9 12-19-2008, 11:58 AM

Kiwi, pretend none of us have any idea what you're trying to do (we don't) and explain succinctly what want.

Kiwi06 · #10 12-19-2008, 04:16 PM

OHLC stands for the 4 elements displayed on a typical price bar:
• opening price; e.g 1.3019
• highest price; e.g 1.3403
• lowest price; e.g 1.2998
• closing price. e.g 1.3351

Look at the historical data.
You look at each bar and calculate the how many points are from the Open to the High (Long) and the Open to the Low(Short).
From that I look for the highest probable Take Profit (TP) and the highest probable Stop Loss (SL) for both the potential Long and Short positions
The starting point for the TP and SL calculations is 50 points with increments of 1 so the idea is to run a program to find the probability of the price reaching both the TP and SL if the probability is very high I am looking for the system to add a point to the starting point e.g 50+1 then 51+1. Then continue to add a point until the probability reaches a predefined point e.g. 0.75
So if I open a position I know I should have a 75% chance of either my TP or SL being hit or whatever I choose
Formula:
n = number of trials this is the number of bars i.e. days trading data
k = number of successes to see if the TP is hit by the Long
n – k = number of failures for the Long hitting the TP
p = probability of success in one trial for the Long
q = 1 – p = probability of failure in one trial for the Long

The formula above should be performed for both the Long and Short side and both the TP and SL

**shg** · #11 12-19-2008, 04:23 PM

Do what you describe manually and post the workbook?

Kiwi06 · #12 12-19-2008, 04:49 PM

What work book

Kiwi06 · #13 01-09-2009, 01:44 PM

Quote:

Originally Posted by Kiwi06

What work book

Right here is the work book

Open High Low Close Volume High Diff Low Diff
1.6686 1.6720 1.6539 1.6605 5374 0.0034 0.0147
1.6595 1.6599 1.6529 1.6548 5335 0.0004 0.0066
1.6531 1.6657 1.6480 1.6557 5114 0.0126 0.0051
1.6556 1.6584 1.6464 1.6507 5482 0.0028 0.0092

High Diff and Low Diff if the point count from open to either the high or low.
I’m trying to find an excel formula for this.
I have a preset TP ( ref MM Sheet cell B20) lets say 50 points I’m trying to figure out based on the info above what the probability is if I open a long position of hitting that 50 point TP or if I open a short position what the probability of hitting the 50 point TP the direction with the highest probability is the direction you open your position in theory
I can appreciate that on a one bit of data you have a 50/50 chance but based on just one other peice of data being in the equation that percentage must change.

Any help would be great.

Regards

Kiwi

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