How to Calculate Probability in Price

So many have asked for tutorials on some quant strategies. So this is my first tutorial for some basic quant trading strategies.
This is not really a strategy in and of itself, this is to help you determine realistic price points as part of your overall strategy.

You will need Excel to do this.

If you like this kind of tutorial/find it helpful, let me know and I can continue posting similar stuff on how to apply some more basic quant strategies into your trading.


Take care and trade safe!

Comment:

Just wanted to point out some things I skipped over in the video because I either forgot to mention or I didn't really think about (I live and breathe statistics on a daily basis and sometimes I just think people also have statistics backgrounds haha, I try to be very easily understood but I am not always unfortunately):

Data Updating:
For probability assessments, probability is in constant flux. Every passing day, probability shifts and thus its important to keep your probability models up to date with recent data! I personally update mine weekly, however during 2021 , I would do it more frequently (But to be honest, I didn't rely a lot on probability in 2021 because the market had one direction, up. I have relied on these assessments 100% more this year).

Why/How it works Prospectively
So, for prospective assessments, which is the application I intend to use it for here and how I have displayed it to be used, the ideal situation is for the data to be as linear as possible and as normally distributed as possible.

The best way to determine this is by running statistical analyses and histograms; however, this requires a bit more of a higher level understanding of stats concepts. To simplify this, the reason I explained how you should assess your time frame the way I have shown is because this ensures you are getting the most, albeit subjectively, linear and normally distributed data you can get without doing complex stats calculations and tests. Out of curiosity I ran a test on the time frame chosen for this video, and it was actually pretty on point with how the distribution turned out! Meaning the data is actually reliable in its power to prospectively ascertain future events (kurtosis was slightly less than 0, meaning slightly skewed but VERY close to normal distribution).

If you deviate from this method of determine your data, you may take away the predictive power of the probability assessment.


Perhaps I will do that as my next tutorial, show you how to check distribution, etc. and what you can use this for to make predictions.

But the key take away is if you follow the steps in this video identically, the data should be reliable enough to draw prospective assessments of probability! But just remember to update it and frequently.

Thanks for watching/reading and leave your questions below!