Candle prediction statistic

Big

(Data used: 1 Hr data)

This is eventually the kind of thing I want to be doing with waves eventually… I think.

There’s a good bit of stuff in this picture that’s less self explanatory than my other statistics. I showed a bit of the actual data set for reference.

What I’m trying to look at here is how many consecutive bars is too many? How often do certain candle patterns show in terms of pure color? In answering a very basic question, if the bar is green, what’s the likely hood that the next bar is green as well?

Null bars should perhaps be labeled as dojis: the open and close are the same.

The first statistic is looking at probability of occurrence without regard to exclusivity. This can be shown by the snap shot of the output on the left and right side. There is a portion where the data is green, green, green, green, green, green. The right side will show that the pattern of a green bar followed by another green bar happens 5x here (as shown by the listing of 2 con for (2 consecutive) 5 times in a row). In practical terms, this means that if we see 2 green bars, the probability that the next bar will be green is still ~44.74% (I hope this is correct at least O_o). The frequency %’s are taken in comparison to the total of 90159 bars. This means we expect to see a green followed by a red or a red followed by a green 55% of the time. We expect to see two greens or two reds together about 44% of the time. The chance you see 7 of 1 color in a row has a chance of .7%

However, I think the second statistic takes away some of the blurriness of the first. This is searching for a very specific pattern; that the consecutive bar color will be then broken. These frequencies are taken with respect to their non exclusive patterns:

fix

For example, the first RG/GR remains the same, but the second now reflects a different prediction taking exclusivity into account. If there are 2 red bars, the chance that the next bar will be green is 55.01%. Interestingly enough, this number stays in the high 50’s range for even seeing seven green or red bars in a row. Doesn’t look like flipping coins does it?… What would happen if we did this with coins?

coints

Well, as we expect, coins don’t have memory. The chance that the next flip will be heads after 5 heads in a row will still be roughly 50%.

In the hour data though, it seems to be that “stopping force” seems to be present. The chance is slightly higher than after a run up of 5 green bars, there will be a red to follow.

Of course, this study “supported” by opposing arguments. While buyers have to sell and sellers have to buy eventually, there is also momentum building that would push the next bars to be the same color. The chance that you have 5 green bars in a row in the Asian session vs London is quite different. These also have different meanings. There is no note of candle height. I believe this is why calculating waves will bring better variance in percentages. Hopefully my statistics are not simply done incorrectly.

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2 thoughts on “Candle prediction statistic

    1. lgtrader Post author

      Sorry your comment appeared in spam so I didn’t see it until now.. You are always welcome to share my content, it is a public blog after all

      Reply

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