18C Probability question

Hi Jeff,

That last 75% chance refers to when a BO actually succeeds, then it's likely to be in that direction. For example, when a BO actually succeeds out of a bull channel, there's a 75% chance it will be a bear BO. When a BO actually succeeds out of a bear channel it's high probability to be to the upside. A successful BO is one that has good FT and proceeds to restart the market cycle. Until then, attempts at BO will be failing with a 70% chance within 5 bars and returning back into the channel.

So just because it's a bull CH doesn't mean breaking below will automatically cause a bear trend. It's usually just something that broadens the channel and makes it wider and shallower and then it usually continues higher, for example:

So they are separate probabilities for different situations. 

Hope this helps,
CH
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In addition to Carpet's comment, I want to clarify that the "70% chance of reversal within 5 bars" topic is specifically referring to a bull breakout of a bull channel (i.e. acceleration up) and a bear breakout of a bear channel (i.e. acceleration down).

If that mathy stuff is troublesome, think of it this way -- Odds of something failing, once it occurs (such as what happens after a bull BO of a bull channel, succeed or fail), is a completely separate statistic from odds of something happening before anything happens (odds of the break of bull channel being the bull BO versus the bear BO).  So, conditional probability stuff.

Thanks for your quick response. My take-aways are; most BO fail (also inside a channel) and if they succeed, they have far more chance of succeeding countertrend?

It seems more intuitive not to cut these percentages up but to combine them like this:

Calculating Overall Probabilities

To combine these probabilities, consider the following steps:

1. Identify the Total Number of Breakout Attempts:

   • Out of 100 breakout attempts (for easy calculation):
     • 70 will fail.
     • 30 will succeed.

2. Direction of the Successful Breakouts:

   • In a bull channel:

     • Of the 30 successful breakouts:
       • 75% (22.5) will be to the downside.
       • 25% (7.5) will be to the upside.

   • In a bear channel:

     • Of the 30 successful breakouts:
       • 75% (22.5) will be to the upside.
       • 25% (7.5) will be to the downside.

Overall Success Rates

To get the overall success rate for a specific direction, consider the proportion of all breakout attempts:

• Bull Channel:

  • Successful downside breakouts: 22.5 out of 100 attempts.
  • Successful upside breakouts: 7.5 out of 100 attempts.

• Bear Channel:

  • Successful upside breakouts: 22.5 out of 100 attempts.
  • Successful downside breakouts: 7.5 out of 100 attempts.

I personally would also want to split out the breakout attempts into 4 categories:

bull BO of bull channel

bear BO of bull channel

bull BO of bear channel

bear BO of bear channel

and then see the % success of those... Also keep in mind there was not a clearly established definition of "success" either.  Like if the BO occurs on b75 (81 bars in the day) then do I also need to measure success by looking at the bars on the following day?  Shrug.

If you are super curious you could go do your own manual backtest with your own definitions just to see what happens.  It can be a useful exercise to learn and pick up on patterns and nuances. 

The specific numbers are not the important part here, it's the notions:

1) you eventually, and often BO of a channel in the CT direction (bear BO of bull channel)

2) with-trend BO of channel usually "fails" -- i.e. closes back into the channel (or some definition like this).  Doesn't mean it has to reverse the trend to be considered a failure...

Respondido por: Daniel

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The specific numbers are not the important part here, it's the notions:

1) you eventually, and often BO of a channel in the CT direction (bear BO of bull channel)

2) with-trend BO of channel usually "fails" -- i.e. closes back into the channel (or some definition like this).  Doesn't mean it has to reverse the trend to be considered a failure...

Yea I guess this is the conclusion. Would be cool if there was a probability list all of Al's patterns, of all the ones he mentions in the videos. Not his trading setups, but more the patterns, like in this post and for example BOM = 50/50 etc. 
Im trying to fish them all out of the vids myself, but maybe theres already a list someone made?

We have a couple people in our Telegram group who've curated extensive lists of Al's probabilities.

Respondido por: Mr. Carpet

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We have a couple people in our Telegram group who've curated extensive lists of Al's probabilities.

Cheers, thanks for your answers!