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When it comes to trading, each of us dreams of predicting the future. But here's the problem - we are not magicians, and we do not have a crystal ball. What to do? Let's turn on logic, statistics and probabilities! đđ Let's figure out how it works and how simple mathematics can turn you into a real market forecaster. đ
Statistics is magic with numbers đź
Do you know why trading is not a roulette? Because we have data. Correct interpretation of this data helps to understand where the market is moving and turns an ordinary trader into a master of forecasts. Let's get acquainted with the main statistical tools.
Three Musketeers of Trading:
1. Mean is like the average temperature in a hospital. It shows you how the price "felt" on average over a certain period of time. But don't rush to make a decision based on the average price alone, because volatility is a real bully!
2. The median is a fair judge. It shows the point where half the prices are higher and the other half are lower. Sometimes the median can give you a more accurate understanding of the market than the average.
3. Standard deviation is your market "weather" indicator. It tells you how much the price can deviate from its average value. The higher this number, the more likely the market is behaving like a capricious teenager. đ
Probabilities: Playing Chess with the Market đČ
When it comes to trading, probability is your strategic compass. We are not talking about 100% predictions (that would be too easy, right?), but we can determine with a high degree of probability what will happen next.
Example: How does 80/20 work in trading?
In trading, the 80/20 principle is often used: 80% of the time the market moves in one direction, and 20% of the time it corrects or reverses. Knowing this, you can choose your entry and exit moments with greater accuracy. It's almost like knowing that 80% of the time the chocolate on the store shelf will be there! đ«
How to calculate the chances of success?
Imagine that you have a 70% chance that the price will go up and a 30% chance that it will go down. You would, of course, prefer the trade with the higher chance of success. But here too, it is important not to forget about risk management. Even with a 70% chance, the probability does not guarantee success, so insurance in the form of a stop loss is your salvation.
Trader's Tools: Statistical Indicators đ
1. Bollinger Bands is a magical indicator that shows how volatile the market is. If the price is at the upper limit, it is time to think about selling, and if at the lower limit, it may be worth considering buying.
2. RSI - will tell you when an asset is overbought or oversold. It's like too much sugar - when the market has "overdone it", a correction may be coming soon.
Risk Assessment: Be One Step Ahead! đ¶ââïž
Every trade is not a roulette. It is a conscious choice based on probabilities. The risk must be calculated and your capital must be protected. The rule of 1-2% of capital per trade is what will help you stay in the game even after a series of losses.
Market Forecasting: Math Instead of Magic đ
When you start using statistics and probabilities, the world of trading becomes more predictable. Historical data is your best friend. If an asset has grown in September over the past 5 years, it is highly likely that it will show similar dynamics this year. But be on the alert - the market loves surprises! đą
Predictions without magic
Math is your secret weapon in trading. It will help you predict when to act and when to sit back and watch. Use statistics, keep an eye on probabilities, and remember to manage risk â this is how you will turn trading into a smart game.
Start predicting the market today! Become a master of probability and track your trades scientifically. Subscribe, like the article and tell us about your successes! đđĄ
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