Wednesday, August 09, 2006

What the Odds Say so far


As we have mentioned on previous blog posts, we are running "The Odds Maker" in alpha-testing internally to determine how it's working, what it is saying, and its overall stability under simulated high-traffic conditions.

We receive a lot of emails and comments asking us, "What is working in today's very crazy market?". The answer?

Extensions away from the mean. Specifically

Momentum shorts reverting to the mean.

By far the strategies with the highest probability of winning trades over the last 3 weeks are those that go short after an extended move upward away from its average price on relatively low volume. These strategies, modeled using The Odds Maker, point to winning trades at the rate of 60 - 75%. This is contrast to our own Sample Strategies featured within Trade-Ideas. In fact in reviewing our Sample Strategies and many of those found in our blog's Strategy Sessions, we find few strategies that give better than 50% odds on the long side at this time. That could easily change.

This probability is not based on magic numbers of any kind, neither does this mean that are no high R trades on the long side out there. Rather the statistical analysis that compares the performance of these strategies within the recent market activity points to a larger number of winning trades on the short side than the long side. Can it change? Yes it can, but right now the path of least resistance is down.

4 comments:

Anonymous said...

Very interested in this new product!

Anonymous said...

Will this new Odds Maker work with Medved?

TI Maven said...

Hi,

Yes the odds maker will be available in the Medved integrated version. People who want to access it will need to upgrade to latest release.

Anonymous said...

You make the analogy that it is like knowing the percentage odds on a hand of poker but in reality with the market we are dealing with a constant shuffling deck, so to speak; whereas in a poker game the cards are definable. Nontheless seems like a great add on to an already strong product.