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Math Help: Probability

  • #1
  • First Post: Jul 10, 2011 7:46pm Jul 10, 2011 7:46pm
Hey!

Would appreciate some help with this situation please,



if I have a 66% chance of winning when price moves in my favor 50% of the time.

what is my chance of winning when I have a 70% chance price will move in my favor?


This might seem confusing please let me know if I am being unclear.. but I stated it as clearly as possible

I suppose most are thinking "how can you have 66% chance of winning when price moves in my favor only 50% of the time" but thats exactly my case (i did not mistype etc.) just trying to figure out what my % chance of winning is if price moves in my favor 70% of the time.



Thank you for you help!!!!!
NY
  • #2
  • Jul 10, 2011 8:18pm Jul 10, 2011 8:18pm
If everything is directly proportional it would be about 92%.
Damn The Torpedoes, Full Speed Ahead!
  • #3
  • Jul 10, 2011 8:30pm Jul 10, 2011 8:30pm
The formula:

66 divided by 50 = 1.32 (if you wanted to change it to a decimal, you would get the same thing, i.e .66/.55=1.32)

70-50=20, multiply 20*1.32=26.4 , add that (26.4+66=92.4)

This is all proportional.
Damn The Torpedoes, Full Speed Ahead!
  • #4
  • Jul 10, 2011 8:45pm Jul 10, 2011 8:45pm
Quoting DizzleFX
The formula:

66 divided by 50 = 1.32 (if you wanted to change it to a decimal, you would get the same thing, i.e .66/.55=1.32)

70-50=20, multiply 20*1.32=26.4 , add that (26.4+66=92.4)

This is all proportional.
cool this is pretty much what I thought but I also got confused if I should do 66/50 or 50/66

lol, needed an unbiased confirmation


Thank you!
  • #5
  • Jul 10, 2011 8:57pm Jul 10, 2011 8:57pm
Quoting DizzleFX
If everything is directly proportional it would be about 92%.
should all be directly proportional in my case

basically this means to me that worst case scenario if I guess horrible I'll have 66% chance of winning

and given a very good speculation I'd have 92% chance of winning


the real crazy part I suppose is that the risk to reward is 1::2.83
  • #6
  • Edited 9:32pm Jul 10, 2011 9:11pm | Edited 9:32pm
I thought about it the same way, wasnt sure which way to divide it by. After doing the math, it just made more since to do 66/50, because your odds of winning with 50/66 were less than the difference in the increase of the move in your favor. No math major here, i could be wrong!
Damn The Torpedoes, Full Speed Ahead!
  • #7
  • Jul 10, 2011 9:15pm Jul 10, 2011 9:15pm
Quoting newyear498

the real crazy part I suppose is that the risk to reward is 1::2.83
Would that be an average?

Just trying to figure out were the 1:2.83 came from
Damn The Torpedoes, Full Speed Ahead!
  • #8
  • Jul 10, 2011 10:09pm Jul 10, 2011 10:09pm
Quoting newyear498
should all be directly proportional in my case

basically this means to me that worst case scenario if I guess horrible I'll have 66% chance of winning

and given a very good speculation I'd have 92% chance of winning


the real crazy part I suppose is that the risk to reward is 1::2.83
Just curious, what timeframe are you trading off and how often do you enter trades?
  • #9
  • Jul 10, 2011 11:00pm Jul 10, 2011 11:00pm
Quoting DizzleFX
Would that be an average?

Just trying to figure out were the 1:2.83 came from

Yeah 2.83 is the average between winning trades, I haven't found a way to increase it to a nice round number like 3 LOL

kinda a screwball number I know...
  • #10
  • Jul 10, 2011 11:05pm Jul 10, 2011 11:05pm
Quoting 2+2=4ex
Just curious, what timeframe are you trading off and how often do you enter trades?
This is entered on the daily, once a day if no previous trade is overlapping
  • #11
  • Jul 10, 2011 11:08pm Jul 10, 2011 11:08pm
Quoting newyear498
This is entered on the daily, once a day if no previous trade is overlapping
I guess this could also be applied on any TF.. but the daily seems best.. I wouldn't want overtrading.. and likely if the market conditions are bad one day then it would most likely mean many loses on that given day.. so I just wait for the next one
  • #12
  • Jul 11, 2011 7:48am Jul 11, 2011 7:48am
I don't understand.. 50% it moves in your favor but 66% time you profit?

so if price goes against you and hits your stoploss you only lose 33% of the time?

how do you only lose 33% of time price hits stoploss?

I don't believe this is possible?
  • #13
  • Jul 11, 2011 8:37am Jul 11, 2011 8:37am
Quoting pallybaby
I don't understand.. 50% it moves in your favor but 66% time you profit?

so if price goes against you and hits your stoploss you only lose 33% of the time?

how do you only lose 33% of time price hits stoploss?

I don't believe this is possible?
there is a difference between price moving in your favour, and continuing to move in your favour to a degree where you are happy to move a stop into profit or for price to hit a take profit level.

if price moves in his favour then 66% of those times it continues to travel where he wants it to go to instead of hitting a losing stoploss.

it's like saying every second girl i meet i can smooth talk her into getting naked. 66% of the time i get a girl to undress i'm also going to get some action, but 33% of the time she changes her mind and gets dressed and calls a taxi.
Congratulations ScalaFX for coming out of the closet!
  • #14
  • Jul 11, 2011 9:05am Jul 11, 2011 9:05am
here are my thoughts

for simplicity lets assume you take 200 trades
so price moves in your favor 50% of the time -> you lose 100 trades
the other 50% win with a chance of 66% so you lose another 34 trades
only 66 out of 200 trades are winners so you win only 33% of the time (66/200*100)

now if you calculate with 70% in your favor the math is:
200 trades 30% losers = 60
140 move in your favor
so 66% of 140 is 92.4 trades = 92 trades win and 48 lose

to sum up 108 lose and 92 win thats 46% winning rate (92/200*100)
  • #15
  • Jul 11, 2011 9:09am Jul 11, 2011 9:09am
Quoting nubcake

it's like saying every second girl i meet i can smooth talk her into getting naked. 66% of the time i get a girl to undress i'm also going to get some action, but 33% of the time she changes her mind and gets dressed and calls a taxi.

Lol......well put!
Damn The Torpedoes, Full Speed Ahead!
  • #16
  • Jul 11, 2011 9:39am Jul 11, 2011 9:39am
Quoting nubcake
there is a difference between price moving in your favour, and continuing to move in your favour to a degree where you are happy to move a stop into profit or for price to hit a take profit level.

if price moves in his favour then 66% of those times it continues to travel where he wants it to go to instead of hitting a losing stoploss.

it's like saying every second girl i meet i can smooth talk her into getting naked. 66% of the time i get a girl to undress i'm also going to get some action, but 33% of the time she changes her mind and gets...
lol, pretty well said (dont tell my GF) AHHH!!!
  • #17
  • Jul 11, 2011 9:59am Jul 11, 2011 9:59am
Quoting rvoiz
here are my thoughts

for simplicity lets assume you take 200 trades
so price moves in your favor 50% of the time -> you lose 100 trades
the other 50% win with a chance of 66% so you lose another 34 trades
only 66 out of 200 trades are winners so you win only 33% of the time (66/200*100)

now if you calculate with 70% in your favor the math is:
200 trades 30% losers = 60
140 move in your favor
so 66% of 140 is 92.4 trades = 92 trades win and 48 lose

to sum up 108 lose and 92 win thats 46% winning rate (92/200*100)
for me if it moves in favor 50% of the time I win 66% of time and lose 33%

so after 200 trades I would lose 67 trades and win 133





the way my position is structured shifts the risk in my favor as the day develops, I don't really want to share it because its pretty bad ass..

its actually like a parrando's paradox.. but not technically because that states an alternating system.. instead I combined simultaneous methods


I'm pretty sure 92% is the correct figure but again no one whos a math major has confirmed so I could be wrong.. however I am confident that in a 50% world the 66.6% win rate holds true if theres a 70% chance it will go up / 30% it will go down.. the win rate increases to 92% (if I take it long in 70% direction)


the system can still lose as any system can.. if there is a 70% chance to go up and a 30% to go down.. I take it short..

I will lose 60% of the time

however with the risk to reward being 1:2.83 I still end up ahead, I would just need to be able to handle a higher rate of consecutive loses




Still waiting if there are any quants who have better mathematical insights than myself
  • #18
  • Jul 11, 2011 10:29am Jul 11, 2011 10:29am
i don't understand this dark arts mathimagic you guys are doing.

if you start with a 50/50, then nothing can exceed 50%.

half the time you flat out lose. the other half of the time you win 66% of the time and the rest you again lose. 66% of the potentially winning 50% is 33%... out of 200 trades is 66 WINNING trades, and 134 losing trades.

without accounting for the R/R this potentially means little. but, my math differs to what has been presented here.

how can you get 90+% win rate when you already state half of the time you flat out lose?

or did i miss a step and you aren't entering on the 50/50 and are instead waiting for it to move and THEN you get the 66/33 situation? in that case in my mind it's simply 66% wins as declared.

i'm confused.
Congratulations ScalaFX for coming out of the closet!
  • #19
  • Jul 11, 2011 10:37am Jul 11, 2011 10:37am
The problem is ill specified. It's like asking this: "If I increase the area of a circle with 20%, how much will this other segment length which is now 66 cm increase?" Well, that question doesn't make sense, you can't answer that question without knowing the relation between the segment and the circle area.

In the OP question, there are no mentions of stuff like if each run is independent of the previous ones (for example a binomial distribution). The computation which leads to 92% assumes independent trials. But we all know that financial markets don't have this property. So the computation may be valid for a game with coins, but it's not for a financial market where auto-correlation exists.

For example, what does "price moves in my favor" mean? Starting from when? From when the position was opened? After break-even? After almost hitting the stop loss?

The question needs to be rephrased in a more formal way for an answer to be computed.
  • #20
  • Jul 11, 2011 10:38am Jul 11, 2011 10:38am
Quoting newyear498
Hey!

Would appreciate some help with this situation please,



if I have a 66% chance of winning when price moves in my favor 50% of the time.

what is my chance of winning when I have a 70% chance price will move in my favor?
Let's assume that if the market "moves in your favour", you win 100%.
And if the market doesn't "move in your favour" you win 33%.

With 50% "moves in your favour", you make 0.5*1+0.5*0.33 = 66%
With 70% "moves in your favour", you make 0.7*1+0.3*0.33 = 80%.

Or we could assume that "move in favour" = 66% win, "move against" = 66% win.
Then, obviously, it doesn't matter what the % "moves in your favour" is.

Since you haven't told us what affect this " move in your favour" has then we can't answer your question, but the best case is 80% from what you have told us.
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