Probability of a random walk reaching the point X; maximal c

  • #1
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https://ibb.co/guBuPd As the title indicates, I want to calculate the Probability of a stock price reaching a determined point, by considering the system as a random walk model, and after that, to compute the so called "maximal curves". I found the whole explanation in this article: http://forexop.com/strategy/stop-loss-profit-placements-max-returns/ The thing is that I have little knowledge of mathematics, and thus I have no idea about how that formula is calculated. (Excuse my ignorance, but I do not know what the n above the term (m+n)/2 means. I have no idea about how to calculate it) Secondly, After calculating it, it says that "we convert the price Z, using the volatility, into a standard unit variable, for comparison against the step process". What does this mean? I understand from it that I have to Z-score the price movements (Price movement/ (sigma* sqr(time/steps))) But how do I get the maximal curves from "comparing it with the step process". I do not really understand that part of the article Again, I apologize for my ignorance and silly questions Thank you all beforehand
 

Answers and Replies

  • #2
StoneTemplePython
Science Advisor
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I found the whole explanation in this article: http://forexop.com/strategy/stop-loss-profit-placements-max-returns/ The thing is that I have little knowledge of mathematics, and thus I have no idea about how that formula is calculated.
Random walks are not a particularly easy topic. You are in way over your head. There are much easier ways to lose all your money. For some background on the Foreign Exchange world and associated "advice" on the internet, see this recent thread:

https://www.physicsforums.com/threa...neer-with-good-background-in-maths-nn.949146/

- - - -
my favorite thing in that article is the "discrete unitary step function" which sounds like either "discrete unit step function" or the author is just making things up.
 

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