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I have what I think is an interesting way to look at increasing win/loss ratio on trades. I'm looking for a productive conversation on the pros and cons of the approach and if you see obvious flaws please share.
My Hypothesis
If I took stock ticker XYZ (example) and tracked it over a 1 month period, paying attention only to green days (days it traded in the green) and red days (days it traded in the red). Is it not possible to find opportune times to pull the trigger on making a day trade for a couple of percentage points after X number days in red?
Example: XYZ traded in this order over a month
How this differs from Roulette (picking black v red)
In roulette you can try to guess black/red all you want but with each new ball throw there is equal chance for it to keep repeating, technically speaking the ball could land red 100 times in a row (highly unlikely due to odds, but still possible). There is nothing holding a roulette ball from landing red again just because it went red 19 times in a row.
With the hypothesis above, there are obviously things holding back a stock from traded red 19x in a row. It's bound to the market and its value as a company. For something to trade like that so many times in a row it would have to essentially be going bankrupt. Even in a 'crash' (I checked prices during 08' - 09')
So if XYZ ticker trades red 5 days in a row, it almost feels more safe to make a trade that 6th day because at some point it does have to rubber-band back the other way even if just a percent or two.
Technical indicators
I understand there are loads of indicators to help try and make better trades, but I view this strategy as kind of a zoomed out, birds eye view across a month. It makes the decision slightly easier.
Now I ask you all...
Does this make sense? Thoughts and comments are welcome.
My Hypothesis
If I took stock ticker XYZ (example) and tracked it over a 1 month period, paying attention only to green days (days it traded in the green) and red days (days it traded in the red). Is it not possible to find opportune times to pull the trigger on making a day trade for a couple of percentage points after X number days in red?
Example: XYZ traded in this order over a month
- 2 days red
- 2 days green
- 3 days red
- 1 day green
- 4 days red
- BUY/SELL HERE
How this differs from Roulette (picking black v red)
In roulette you can try to guess black/red all you want but with each new ball throw there is equal chance for it to keep repeating, technically speaking the ball could land red 100 times in a row (highly unlikely due to odds, but still possible). There is nothing holding a roulette ball from landing red again just because it went red 19 times in a row.
With the hypothesis above, there are obviously things holding back a stock from traded red 19x in a row. It's bound to the market and its value as a company. For something to trade like that so many times in a row it would have to essentially be going bankrupt. Even in a 'crash' (I checked prices during 08' - 09')
So if XYZ ticker trades red 5 days in a row, it almost feels more safe to make a trade that 6th day because at some point it does have to rubber-band back the other way even if just a percent or two.
Technical indicators
I understand there are loads of indicators to help try and make better trades, but I view this strategy as kind of a zoomed out, birds eye view across a month. It makes the decision slightly easier.
Now I ask you all...
Does this make sense? Thoughts and comments are welcome.
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