How to handle Market correction/crash???

uasish · #11 27th April 2008, 01:36 PM

Quote:

Originally Posted by oxusmorouz

Great to see you posting again CV. From what I can see, the distribution problem can also be handled in excel itself by multiplying the standard deviation by a constant value, for a given mean (in a log distribution). If the mean daily return is found out to be .0% a day with a SD of 1 (say), a constant of 1.2 (say) is multiplied to get a value of 1.2% ( instead of 1, as assumed in lognormal distribution).
The function, NormalRandom(0,1.2) [where 0 is the mean and 1.2 is the new standard deviation] has the usual 99% of the items within 3.6 of the original standard deviation and not 3.
Once the returns for n days are calculated and the 1st price is known, we can find the stock price for each of the n days by Previous price*(1 + current returns).

Of course, while this deals with kurtosis, it doesn't take into consideration the skewness. Any other way to handle this problem CV?

Waiting for Jesse's suggestion to tackle the asymmetry of the distribution,either with Left or Right longer tails.

omkarmango · #12 27th April 2008, 02:19 PM

Quote:

Originally Posted by raosrinivas

monte carlo similation, lagrangian interpolation, standard deviation, lognormal distribution, i am so scared, do i have a chance to make any money in stock market when i don't really understand anything here. luckily some one said 'when you see a phd running a company , run away from it', so i have some remote chance. all of this reminds me of my statistics and operations research classes.

yeah..

.. the terminology is scary than the application.

But one should never forget,
Scripting capabilities of your TA software & your capability to exploit it....is a must to build robust system.

Quote:

Originally Posted by oxusmorouz

You can do this in excel itself

Excel does wonders... it becomes as vibrant as you are.

st777999 · #13 27th April 2008, 02:32 PM

Divergence in indicators gives you a very reliable signal that the market has lost steam. Volume based indicators like obv and ad line , and the money flow index give you good signals about what the big fellows are doing and you can act on that. Market crash I think is never sudden, the big fish know about it and their actions can be reliably deduced from the indicator divergence and volume indicators.

pannala.srinivas · #14 3rd May 2008, 01:46 PM

Hi every body, can anyone suggest the book about Trading called .TRADING FOR LIVING,
BY Alexeder Edler. where it is available and how to purchase.

Regards

P srinivas