/biz/ - Business & Finance

>>1843635
for starters, learn some basic technical analysis and apply some simple math. its not hard.

all financial instruments, not just stocks, have something called "support" and "resistance" (bottoms and tops). support means people put a lot of buy orders at a certain price, and resistance means people put a lot of sell orders at a certain price.
the reason why they do this is usually purely psychological. mathematical if they're more sophisticated. the longer a lowest price stays the lowest price, people tend to believe the price wont go further than that number. the same goes for resistance points. so people are less motivated to sell near the support, or buy near the resistance, and more likely to buy near the support, and sell near the resistance. this psychology makes prices at sup/res hard to push through, and causes prices tend to temporarily reverse from those points

just by knowing this, you can form a strategy that will be profitable long term. find some stock with a reoccurring support/resistance and set a buy order just above the support, or a short order just below the resistance. as well as a stop loss orders on the other side of those barriers. take your profits if price reverses. take your loss as soon as the support/resistance is broken. your potential reward:risk should be atleast 2:1, and you have a minimum 50% chance of winning. (100% guaranteed this is what a lot of algos do)

use formula u learned in math class P(x)=[n!/x!(n−x)!]*p^x*(1−p)^(n−x) to figure out whats the probability of you making more than break even for break even, out of say 30 trades because thats all you have patience for.
since probability of win:lose is (Atleast) 1:1 and reward risk is atleast 2:1, lets just say you need to win 10 times and lose 20 times to break even, so set x=>10 < 30 and find cumulative P, which is 98%. you'll see its literally impossible to do worse than break even.

trading, not gambling