Stock Market Probability in a Spread Sheet

[rebel123]

Would anyone know how to compile the history of the Dow Jones (either from inception or say the past 20 years)
where I could figure out probability of stocks going up two times and then down once AND ALSO three times up and then down once.

Here are the 2 questions and patterns I am looking to solve.
I am looking to solve the equations in bold.

DAY 1 DJIA goes up
DAY 2 DJIA goes up
DAY 3 DJIA goes down (what is the probability on day 3- is it 60%, 80%, etc)


DAY 1 DJIA goes up
DAY 2 DJIA goes up
DAY 3 DJIA goes up
DAY 4 DJIA goes down (what is the probability on day 3- is it 60%, 80%, etc)

 

[KRice]

I downloaded it but do not know the answers it says

Post back with any questions, and please clarify the issue we discuss above. As an example, suppose the DJIA closes up on Tuesday (compared to Monday's close) and also closes up on Wednesday (compared to Tuesday's close). So we have a UU pattern. Then suppose Thursday's close is down (compared to Wednesday), producing a UUD pattern. There is a difference between:

1. estimating the probability that the third day's close will be "down" given that the previous two days were UU, and
2. estimating the probability that a sequence of UUD occurs

The result shown in cell R2 indicates the expected probability of the first case is about 49 %, while the result in cell H1 indicates the expected probability of the second case is about 13 %.

 

[rebel123]

h

Post back with any questions, and please clarify the issue we discuss above. As an example, suppose the DJIA closes up on Tuesday (compared to Monday's close) and also closes up on Wednesday (compared to Tuesday's close). So we have a UU pattern. Then suppose Thursday's close is down (compared to Wednesday), producing a UUD pattern. There is a difference between:

1. estimating the probability that the third day's close will be "down" given that the previous two days were UU, and
2. estimating the probability that a sequence of UUD occurs

The result shown in cell R2 indicates the expected probability of the first case is about 49 %, while the result in cell H1 indicates the expected probability of the second case is about 13 %.

Thanks KRice. I just liked your post, followed you, and marked as RESOLVED.

Now I just need to find if there are any stock market figures that are better than that.
A 60% odds would be great. Maybe I should try the S&P 500.

If any ideas, let me know. I am trying to find a probable day because I want to swing trade.

 

[6StringJazzer]

Thanks fellas.

We haven't heard from you since first post. Have you read all the responses?

Your requirement is ambiguous. Can you tell us which one of these you want:

1. The number of times there is an up-up-down pattern, as a percentage of the total number of days
2. The number of times that an up-up pattern is followed by a down day, as a percentage of the number of up-up patterns

 

[rebel123]

Thanks. Well yes maybe I did not answer it 100% correctly.


I am not looking for the PERCENTAGE of time each one occurs.

Lets say for example there are 100 Up Up Down Days
and lets say there are 30 Up Up Up Down Days


If the 2 scenarios above were true, I would want the probability for the one
in bolds ONLY

100 Up Up Down
30 Up Up Up Down

So for the ones above there were only 2 possible results which would be as follows
and I highlighted in bold the day that could have EITHER outcome. I only need the
percentage of the one underlined in bold.


Up Up Down
Up Up Up

Up Up Up Down
Up Up Up Up

 

[rebel123]

So, even though I marked this as "Solved" I am not sure that my answer was solved because I probably asked it too vaguely.

 

[KRice]

I think your interpretation was correct, Jeff. It sounds like the OP wants #2, the probability of a down given that an up-up has occurred since there is some mention of a desire to find a probable day for swing trading. So if there were some pattern that foretold with better than 50/50 odds what would happen on the following day, that might be a pattern to watch out for to improve profits.

 

[rebel123]

correct KRICE

 

[StephenCrump]

@rebel123, did you see Post #8?

The workbook attached to the previous thread: DJIA movements up down.xlsx allows you to look at any length sequence of Ups or Downs, and obtain the historical probabilities of a subsequent Up/Down, e.g. as illustrated below the probabilities of :

1. UpUpUp and UpUpDown for all runs starting UpUp, and
2. DownDownDownUp and DownDownDownDown for all runs starting DownDownDown.

Input
Direction of run	Up	Down
Minimum length of run required (N)	2	3
Calculations
Reverse direction	Down	Up
Freq (run reverses at N+1)	72	29
Freq (run of length N or more))	160	59
Prob (reverse after run of N)	45%	49%
Your probabilities	UpUpUp	DownDownDownDown
	55.0%	50.8%
	UpUpDown	DownDownDownUp
	45.0%	49.2%