A great movie called Moneyball is really all about baseball, but the thing behind this story was that they had the courage to stick with their system in the face of a string of successive losses. It’s much like trading as once we have a system that we have backtested, we must believe in it, even within those periods of losses. Knowing what to expect based on precedent prepare traders for a variety of market scenarios.
As example, I know from statistical studies that 70% of the time, the balanced markets tend to revert back to their value, especially under conditions of relatively low momentum. Another stat shows that 75% of the time, the imbalanced markets tend to seek balanced targets (PBT), especially under conditions of relatively high momentum.
Another study shows that if a market opens around previous value area and then pulls back inside value, there is an 80% chance that market will rotate all the way to the other side of value (VAR). One more stat shows that if a market prints a new record high at ETH, there's 80% chance that record high can be revisited during RTH.
86% of the time, when market opens inside the prior day’s range, it will tag either high or low of prior session, creating an outside day.
If the first 15-minute candle of the day is green, 70% of the time the day closes green and if it's red, 70% of the time the day closes red.
If market opens above the prior session’s high (not the close, the high), 70% of the time it moves down to touch or exceed the prior session’s high. If market opens below the prior session’s low, 70% of the time it moves up to touch or exceed the prior session’s low.
Once the price has broken out of the first hour range, 78% of the time, it only breaks that side. Useful, because it's less likely to test the other side of the opening range. Only 5% of the time does the price stay inside the opening hour range (called the initial balance) without a breakout.
-90% of the time, one side of overnight (ON) range is tested.
-86% of the time, one side of prior day range (PD) is broken.
-80% of the time, the previous value area rule is fulfilled.
-80% of the time, the half gap (50% RTH gap) is tested.
-55% of the time, the previous gap has been closed.
-72% of the RTH days are Normal days (Bimodal/Trimodal).
-18% of the RTH days are Trend days (Multimodal Profiles).
-10% of the RTH days are Neutral days (Inside ON Range).
Remember that context is extremely important, don't try to use any statistic as a rigid, systematic trading rule, blindly applied to all market conditions. Statistical analysis provides an hypothesis only; current market action will either support or refute these hypothesis.
