Probability Trader

AUDUSD - Hypothetical Range Analysis Generated by Random Walk Process. In perfect markets, logical reasons exist for believing that daily price movements are random walks or martingales. For the most part serial correlations in daily price fluctuations are typically small. However, even random walks can have a series of runs & can be used to provide insights into the probability (not certainty) of future price levels. In this note we provide a theoretical albeit very simple approach to navigating the forecast noise & provide a probability of price level measurement for the AUDUSD going forward. We create a frequency distribution of 10,000 simulated (artificial) AUDUSD time series going forward 65-days (equivalent to year end 2014). Approximately 50% of the simulated year end levels occur between $0.85 & $0.91. Full data analysis can be viewed at (VIEW LINK)


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Medium screen shot 2016 01 12 at 2.25.34 pm

James Marlay

PT - that seems like a pretty big range.... Is there a further interpretation of these results?

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