Timing is the last component to cover. There can be complicated parts (as I discovered with Anthony Joseph Klatch’s The Market Is Not Random) but as far as the edges I found and where I can apply them easily, I’m pretty satisfied with it and I think the time can be better spent further working on Direction and Momentum.
Daily Breakdown:
This is a re-post of a very old statistic but it’s still one that I use when looking at the market. The question is: How often is a particular day of the week included in either the High or Low of the week?
Monday: 25.07%
Tuesday: 12.8%
Wednesday: 14.38%
Thursday: 18.6%
Friday: 29.16%
So to start, Mondays and Fridays have a slight edge. This becomes more pronounced when the question is clarified. For example:
- week 1: Monday High and Friday Low
- week 2: Monday Low and Thursday High
The easiest way to calculate the frequency of high/low of the week by day would be the following: 2 Monday counts, 1 Thursday count, and 1 Friday count. The % of Mondays would be 50% (2/4), however in reality, since there’s no way to know if the low or high will occur first, we should be dividing by the number of weeks and not the number of data points. Mondays highs/lows actually play a part in 100% of the weeks in this example. Calculating this way leads to numbers being effectively doubled. Now this means that Fridays will be a part of either the High or Low of the week closer to 60% of the time, which is pretty substantial.
Daily Breakdown with conditional:
With Mondays containing the High/Low of the week a high percentage of the time (~50%) a natural question is, how do these percentages change if we can confirm that a Monday is not a High or Low? Visually this means that the Monday range is established, and then taken out on both sides:
Mondays make the most sense for this since it takes time for both sides to be broken, and there still needs to be some time left over to actually trade that knowledge.
Below: What is the probability that day x will be either the high or low of the week given that we know that day y is not the high or low of the week?
Tuesday without Monday: 46.7%
Wednesday without Monday: 41.21%
Thursday without Monday: 42.31%
Friday without Monday: 66.48%
Monday without Tuesday: 64.34%
Wednesday without Tuesday: 34.56%
Thursday without Tuesday: 38.6%
Friday without Tuesday: 59.93%
Monday without Wednesday: 59.47%
Tuesday without Wednesday: 32.58%
Thursday without Wednesday: 42.05%
Friday without Wednesday: 64.02%
Monday without Thursday: 54.74%
Tuesday without Thursday: 28.02%
Wednesday without Thursday: 34.05%
Friday without Thursday: 81.03%
Friday stats are not provided just because they’re not useful. By the time you can conclude anything about Friday, the chance to trade is already gone.
LGtrades 