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Hello, I was wondering if you guys could help give a little clarity on this.
I understand that its a 75% chance of a bear breakout from a wedge top. In this situation it did break lower and then reversed up and broke out above the wedge top. Does this mean also that statistically speaking it indeed succeeded in the 25% chance breakout above the wedge, or did the bull breakout have to occur before the bear breakout?
Al goes on to say that once it broke out above the wedge top it was a 50/50 chance the bull breakout will fail. So some clarity on if this means, a 25% chance of a bull breakout followed by a 50/50 chance the breakout will fail. Meaning overall a 12.5% of a bull breakout actually succeeding into a new bull trend?
I understand that its a 75% chance of a bear breakout from a wedge top.
From a bull trend, not from a wedge top. Any given reversal (be it a wedge or any other) has a 40% prob to be successful. So 75% a bull channel will end up breaking lower but 40% of any given attempt to succeed.
Does this mean also that statistically speaking it indeed succeeded in the 25% chance breakout above the wedge?
Nop, it was a bear breakout that failed.
or did the bull breakout have to occur before the bear breakout?
Therefore this is a yes.
Al goes on to say that once it broke out above the wedge top it was a 50/50 chance the bull breakout will fail. So some clarity on if this means, a 25% chance of a bull breakout followed by a 50/50 chance the breakout will fail. Meaning overall a 12.5% of a bull breakout actually succeeding into a new bull trend?
Yes, this is the basic probability. As always, you then have to fine tune it with the context you have.
Thanks for the response.
I didn't realize (depending on context of course as you said) that it was around only statistically around a 12.5% chance of a new bull trend occurring from an existing bull channel/wedge, etc. Very low...
I also remember Al saying that 75% of breakouts above bull channels will fail within 5 bars and reverse back down to the bottom of the channel. Can you give some clarity on whether it is 50% or 75%?
Thanks!
I didn't realize (depending on context of course as you said) that it was around only statistically around a 12.5% chance of a new bull trend occurring from an existing bull channel/wedge, etc. Very low...
This is good, most of the time, because you will be ready to sell. Yet, the times that the 12.5% happens is more difficult because you have to change your mind an act quickly.
I also remember Al saying that 75% of breakouts above bull channels will fail within 5 bars and reverse back down to the bottom of the channel. Can you give some clarity on whether it is 50% or 75%?
The 50% applies only to wedges, the 75% applies to broad and tight channels (caveat: in the highest time frame).
In the example you gave, it was a break above a wedge so 50%. Rather, if you had a channel up in the 5min chart and the MKT breaks above it, 75% it will will fail within 5 bars and reverse back down to the bottom of the channel. If the channel is visible, for instance, in both the 5 min and 15 min charts, you need to count the 5 bars in the 15 min chart.
