Statistics for Traders


Statistics is one of the most misunderstood and abused subject in mathematics (and science). The reason is something we can all easily understand – statistics is something we can all sort of relating to but counter-intuitive when applied in event by event situations.

Our brains are wired that way so that our ancestors can survive in nature. Since human has not evolved into any better forms for quite some time, yet our civilization is advancing in such a pace that even our computers are outdated every year or two, our minds are not that cooperative when it comes to making decisions that are drastically different from the ones that our ancestors faced. The ability to adapt our minds in making proper trading decisions boils down to our ability in applying logical thinking and statistical analysis properly.

It all sounds so complicated but in reality all you have to do is to take time understanding some basic concepts in statistics, then utilize the distilled rules and concepts to make better trading decisions, as oppose to relying on our gut feelings.


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Essence of Trading: Price Goes Up And Down

Before you spend time even thinking of the more complex price patterns or technical setups, have you even paying any attention to the most basic foundation of the price charts, like the price bars themselves? It does not matter you use candlesticks ...

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Estimate Of Volume Affected By The Sudden Margin Increase On Apple Inc.

I posted in my real-time chat yesterday in the morning that the sudden margin increase on Apple will force a significant amount of stocks to be liquidated and that amount can be estimated. It is not a straight forward formula. Instead we can approach ...

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Seasonality With Job Seeking

A picture is worth a thousand words. Following is the Google Trend on the word jobs searched across the globe since 2004. Notice how the search for the word drops consistently near the second half of each year. Then spike back up in the beginning ...

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Thanksgiving Week Bias

Thanksgiving in US is the 4th Thursday in November. Here is what to expect during this week based on the Thanksgiving weeks over past 19 years for SPY and 13 years for QQQ Expectation SPY QQQ Volume Compari ...

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British Pound Price Action Biases At Weekly Extremes  member only

If you have not read the article on Euro Dollar Price Action Biases At Weekly Extremes please do so as I will not go over the basics here again. Swing Bias In Terms of Previous Week Range Although similar to euro dollar, pound demonstrates subtle d ...

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euro_weekly_stopd_bias_1
Euro Dollar Price Action Biases At Weekly Extremes  member only

2 studies are presented in this article. Let's get started. It is well known that the range of a trading period (i.e. a month, a week, a day), is highly correlated to the range of the trading period right after. The lesser known fact is that the ext ...

10 comments


SPY NFP Play_20121011_123238
Survival Guide To Trading Nonfarm Payroll Report Week

US Nonfarm Payroll (NFP) Report is a monthly report coming from Bureau of Labor Statistics (BLS) that summarizes the employment condition within United States. The week of NFP Report has a special bias that all traders should be aware of. The Irregu ...

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What a Simple Bingo Game Can Teach Us?

Kids playing with a MMORPG (in case you do not know what that is - it is the kind of game Wikipedia founder Jimmy Wales played and probably obsessed with many years ago) found a mini-game within the game that essentially plays like bingo. Each play ...

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Emini SP Double Gap Statistics
Double Gap Statistics  member only

Gaps not filled the same day is a rare event in Emini S&P. It happens less than 4% of the time. Whenever it happens though, it produces a very consistent bias for the next trading day that is exploitable.

If you do not know what gaps are, please read about it in Outside Gap Behaviour, Then and Now.

...

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Emini S&P Afterhours Behaviour Part 4 - Statistics on Projected RTH Price Boundaries  member only

One set of the statistics that I often mention in the real-time chat is the AH High / Low / Mid statistics. For the Emini S&P, Nasdaq 100, and Dow, these index future contracts have 2 separate trading sessions. First the regular trading hours (R ...

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