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There's this inertia rule stating 80% of chance where the BO from any cycle including channel will fail. Meanwhile, a channel is a bull/bear flag, and 75% of the time there'll be a BO.
I'm confused because aren't the two statements contradict each other?
Does that mean 'although 75% chance channels have BOs, 80% of chance those BOs fail in developing into reverse trends?'
Hi,
I am far from an expert, but until you get a more detailed reply I would suggest as follows.
The 80% Rule deals with WHETHER a BO attempt Fail. That is, you ask yourself what is the probability of a Breakout attempt in (say) a Trading Range failing and the market falling back into the range - answer is 80%
The 75% rule deals with the probability of DIRECTION of the eventual BO from a channel. I am not aware it happens any where else.
In a BULL Channel, there is a probability of 75% that the BO will be a Bear BO. A bull BO from a Bull Channel is rarer - probability 25%
In a Bear Channel, there is a probability of 75% that the BO will be a Bull BO. A Bear BO from a Bear Channel is rarer - probability 25%
