Current project I am working on evaluates the probability / percent chance that tomorrow will either be up or down.
After some thinking / research I have this:
Probability of an event = P(E)
n(E) = # favourable outcomes
n(S) = # outcomes
P(E) = n(E) / n(S)
Relating the above equation into candle terms:
up1 = # times a day was up
up2 = # times two days were up in a row
total = total number of days / bars
Results from XJO:
up1 = 1244
up2 = 646
total = 2363
Prob any 1 day being up = up1 / total
XJO: 1244 / 2363 = .53 ie. 53% possibility that a day will be up
Prob any 2 days being up = up2 / total
XJO: 646 / 2363 = .27 ie. 27% possibility that 2 up days will occur at any time. Error here?
This is where I think I may have it wrong, calculating prob for tomorrow (XJO):
up1 = 1244 (# times 1 day up)
dn1 = 1119 (# times 1 day down)
up2 = 646 (# times 2 days up)
dn2 = 522 (# times 2 days down)
totaldays1 = 1244 + 1119 = 2363 (total # outcomes for 1 day up or down)
totaldays2 = 646 + 522 = 1168 (total # outcomes for 2 days up or down
Today was up, then tomorrow up as well = (up1 + up2) / totaldays1 + totaldays2 ?
XJO: (1244 + 646) / (2363 + 1168) = .54 ie. 54% that tomorrow will be an up day, if today was an up day ?
Is this correct?