The Structure & Function of Price

[bettie]

Sorry, I don't see this.No matter how many times a tail comes up in a row there is a 50/50 probability of a tail coming up next time.





I am happy to be proved wrong.

Hi Porper

That is where so many get it wrong.

Keeping it as simple as possible, mathematically the probability of an outcome occuring at any point in time is defined as the number of times that outcome has actually occurred in the past divided by the total number of trials.....hence the 65% probability of a tail on a given toss when historically the coin has spun up tails 650000 times out of 1M

With a flat coin whose weight is exactly evenly distributed then the actual occurences of heads and tails would be very close to 50/50. But if the coin's weight is not evenly distributed or if it is not exactly flat and allowing for varying wind gust strenghths etc etc then the number of occurrences for heads or tails could be biased towards either heads or tails in the long run.

The same principle applies to "loaded" dice which are designed so that one or more of the 6 numbers have a higher probability of finishing face up when the dice is rolled.

Another way of looking at it is the tortoise and hare race. Here there are only 2 possibilities just like the coin (3 if you include a dead heat) but the probability of the hare winning is very much higher than than that of the tortoise's and certainly not 50/50 as I assume you would suggest.

So just like the probabilities of possible outcomes of an event can be biased to one or more of the possible outcomes so can stock price movements be biased to being more likely to move up, down, stay steady depending on factors like human fear and greed being driven by announcements, economic outlooks etc etc etc and these probabilities can be determined using trends (short and long term), support and resistance levels and/or technical indicators on charts.

I hope this clarifies the definition of probability, in very simple terms at least, and how the 3 possible share price movements (up, down, steady) can be assigned probabilities of occurring and very rarely will they all be equal for a given stock at a given time.

 

[Porper]

Hi Porper

That is where so many get it wrong.


With a flat coin whose weight is exactly evenly distributed then the actual occurences of heads and tails would be very close to 50/50. But if the coin's weight is not evenly distributed or if it is not exactly flat and allowing for varying wind gust strenghths etc etc then the number of occurrences for heads or tails could be biased towards either heads or tails in the long run.

I think the goalposts are getting moved here.With a coin toss obviously we are talking about a non weighted coin with no outside influences on the toss.

I still maintain that after ten tails in a row the next toss has a 50/50 chance of being either a tail or a head.

My point however is that the market (and price action) does have outside influences and price action is not random, otherwise we would have no better than a random chance of making a profit.

 

[bettie]

In addition to my last post, if you take an extreme example of say a company like TLS announcing over night they expect a 30% drop in profits this year then imo it will be far more probable that the company's share price will fall on the next open than rise.

Of course this is an extreme case and in most cases there are may more subtle influences affecting buyer/seller sentiment but as I said earlier, very rarely will the probability of a share price going up be exactly 50%, if you exclude the possibility of it staying steady.

I hope this clears up how you can determine probabilities of possible future price movements from charts which show what has happened historically to share prices.

 

[bettie]

I still maintain that after ten tails in a row the next toss has a 50/50 chance of being either a tail or a head.

Yes agree, but only in extremely ideal conditions as per my original post.

But if the coin or dice are not weighted evenly, and these uneven weight distributions are analogous to say human fear/greed affecting share prices as decribed earlier, then the probabilities of each possible outcome will not be equal to each other and hence that is why you can have possible share price movements with high and low probabilities of occurring.

 

[professor_frink]

Yes agree, but only in extremely ideal conditions as per my original post.

But if the coin or dice are not weighted evenly, and these uneven weight distributions are analogous to say human fear/greed affecting share prices as decribed earlier, then the probabilities of each possible outcome will not be equal to each other and hence that is why you can have possible share price movements with high and low probabilities of occurring.

Gee bullmarket, don't you ever give up?

 

[bettie]

Hi PF

I have openly posted that I regularly change my nic on this and other sites.

It's no secret.

 

[Kauri]

Bettie/Barnie ??? Heads or tails esok:

It's pedantic I know but isn't probability a measure randomness, if so a weighted or biased coin or for that matter even an honest coin cannot have probability attached to it, it must be deterministic as it is either head or tail, in line with its bias, although in place of probability it is possible that you could possibly say possibility.
If the representation of a shares value, the closing price, was determined by probability we have a random market. If it is deterministic then what applies the bias to consistently move certain shares in a constant direction which defies the 50/50 rule.If enough people study fundaments and all reach the same conclusion at the same time, and then apply this as bias to the share price, and their bias (as dollars put into the share) is stronger than those who hold an opposite view, the weight of their opinion will determine which way the share price moves. Likewise technical analysis. Therefore I...hang on. someone at the door...

Sorry, got to go, a couple of nice gentlemen in white coats are going to take me for a drive.... :silly:

 

[bam-bam]

Bettie/Barnie ??? Heads or tails esok:

It's pedantic I know but isn't probability a measure randomness, if so a weighted or biased coin or for that matter even an honest coin cannot have probability attached to it, it must be deterministic as it is either head or tail, in line with its bias, although in place of probability it is possible that you could possibly say possibility.

Hi Kauri

Yes I agree that probability can be viewed as a measure of randomness.

But randomness does not mean that every possible outcome for an event, such as the roll of the dice or toss of a coin or tortoise and hare race, must have the same chance of occurring on any given trial. The chances/probabilities may or may not be equal.

A probability can be determined for any possible outcome to an event and is measured in its simplest form as the number of times an outcome has actually occurred divided by the total number of trials.

As I posted earlier, the larger the number of trials you have then the more accurate your determination of each outcome's probability will be.

If for example you toss a coin 7 times and seven heads come up you would be drawing a long bow coming to the conclusion that the probability of a head coming up on any given toss was 100% and that tails had no chance at all of coming up (unless of course the coin was heavily biased towards heads some how). But if you tossed that coin in say 10000 trials and found that heads came up 6000 times then by the definition of probability above imo it is quite correct to say that on any given toss of that coin, based on the results of the 10000 trials, the probability of a head coming up was 60% and the probabilty of a tail coming up was 40%.

The same principles can be applied in determining the probability of possible share price movements (up, down, steady) for a given stock using TA, FA or whatever you prefer to use. An exaggerated example is my TLS example posted earlier.

Therefore, looking for high probability share price movements (up or down) via TA and/or FA and trading/investing in them will greatly improve your chances of being profitable in the long run.

 

[professor_frink]

Bullmarket,
have you done any real research on this?
It's all well and good to say that there is a higher probability of a down day during a downtrend, but what are the actual odds?
If a stock closes lower for 7 days straight, what are the actual odds of it closing up or down the next day? Or if it happens for 10 days straight?
Stories of weighted coins don't really help anyone make a decision on the behaviour of stock.

 

[ducati916]

The following, unfortunately is just more of the same old nonsense.

The same principles can be applied in determining the probability of possible share price movements (up, down, steady) for a given stock using TA, FA or whatever you prefer to use. An exaggerated example is my TLS example posted earlier.

Therefore, looking for high probability share price movements (up or down) via TA and/or FA and trading/investing in them will greatly improve your chances of being profitable in the long run.

You have committed the basic error of extrapolating something that contains probabilities viz. coin tossing, to try and explain a phenomena that is not probabilistic, but deterministic.

Until you understand the difference, and why, you will be highly inaccurate within your premise and assertions, and thus your conclusions.

jog on
d998

 

[bam-bam]

hi ducati

I don't think I am inacurate at all in what I have posted earlier

 

[professor_frink]

Hi PF

I have a set of TA and FA criteria that have to be met before I will buy a stock.

Over the years, whilst occasionally tweaking the criteria a little I have found that buying stocks that meet my criteria have resulted in profits on many more occasions than when they have resulted in losses.

Therefore, from my point of view, when I see a stock that meets my criteria it has a much higher probability of being profitable for me than being a loss, provided of course that I stick to my exit criteria that I have developed over the years.

So that's a no to actually having hard figures then?

 

[bam-bam]

PF

yes I do have records and data from my investments over the years but I don't see how it is advantageous to me to post them because for obvious reaons I will not post personal information to verify them.

Therefore, you can choose to either believe or disbelieve what I post - it doesn't matter either way to me.

 

[professor_frink]

PF

yes I do have records and data from my investments over the years but I don't see how it is advantageous to me to post them because for obvious reaons I will not post personal information to verify them.

Therefore, you can choose to either believe or disbelieve what I post - it doesn't matter either way to me.

I wasn't asking for your records. You are comparing market action to a weighted coin. Where is your evidence to prove this assertion? You haven't given any.

 

[ducati916]

Hi PF

I have a set of TA and FA criteria that have to be met before I will buy a stock.

Over the years, whilst occasionally tweaking the criteria a little I have found that buying stocks that meet my criteria have resulted in profits on many more occasions than when they have resulted in losses.

Therefore, from my point of view, when I see a stock that meets my criteria it has a much higher probability of being profitable for me than being a loss, provided of course that I stick to my exit criteria that I have developed over the years.

Which simply elucidates further your ignorance on the difference between the true definition of a probability, the defining criteria, and a deterministic paradigm.

I have highlighted the relevant section in your post that illustrates the dichotomy of your comprehension. You see, an exit criteria, is a money management tool

Money management [exit] may very well make your methodology profitable.
That however is totally irrelevant to the topic of probability [entry]
Come back when you understand what it is you are discussing.

jog on
d998

 

[professor_frink]

Hi PF

I used the examples of weighted coins, "loaded" dice and the tortoise and hare race to help explain the definition of probability. I then described in general (with the use of TA and FA) how I use probability to maximise the chances of my investments being profitable.

What's funny about this statement, is I think you actually believe that to be true. How sad.

There are countless strategies, criteria or whatever you would like to call them to help increase the probability of trades/investments being profitable and those are a whole different ball game and discussion.

Yes there is. By simply moving you stop up to entry+1, when you are up 2, is going to result in a profit being made. This has absolutely nothing to do with having a high probability entry though.

If you choose to not believe anything I posted that is fine with me

Now why would I not believe something said by an ill informed pest, who continues to stalk an internet forum that doesn't want him around in the first place? You are obviously a sincere, believable gentleman, who's word cannot be called into question

 

[It's Snake Pliskin]

that's ok PF

I think the only sad thing is that you are letting the fact I openly publicise that I regularly change my nic get the better of you and you are clutching at straws trying to guess who is posting what.

I posted once that those who know me personally I inform what nics I use and whether anyone else knows what nics I use is of no interest to me

But watching you trying to second guess what other nics I use, and getting it wrong many of the times is entertaining. I can see in various threads that there are others who change their nics as well so maybe try getting used to it because it happens everywhere

Maybe you should change your nic to detective_frink

Redzed what are your thoughts regarding the structure of price? Is Ducati on the mark?

 

[tech/a]

A much sadder and much lonlier individual that I first thought.

Surely there is a romper room for pensioners without a life that would suit your persona??

Ahh the secrets out this could well be the Prof!

 

[professor_frink]

that's ok PF

I think the only sad thing is that you are letting the fact I openly publicise that I regularly change my nic get the better of you and you are clutching at straws trying to guess who is posting what.

I posted once that those who know me personally I inform what nics I use and whether anyone else knows what nics I use is of no interest to me

But watching you trying to second guess what other nics I use, and getting it wrong many of the times is entertaining. I can see in various threads that there are others who change their nics as well so maybe try getting used to it because it happens everywhere

Maybe you should change your nic to detective_frink

Maybe I should- I wouldn't make much of a detective though- your too stupid to change the way you post- it doesn't require much skill.
If it's sad that I catch you out in your obsession for this forum, how sad does it make you- nothing better to do than to try and participate in a forum that you aren't welcome at

Is Mrs bullmarket really that annoying that you prefer to spend your time on here, rather than spending time with her?
Although she'd have to be weird one to put up with you for more than 5 minutes!

 

[It's Snake Pliskin]

I am now extracting myself from this thread.