Ok, lets re-visit the subject of the statistical proof ‘or tests’ that we did when developing our method. Like I have mentioned before, I am sometimes asked to provide proof of the certainty of Viracocha. Well I don’t possess a crystal ball, and I am prepared to argue that nobody else does. But what we do have is a ‘sneak peek’ if you will into the present situation that is built on the momentum of the market up until now. Viracocha takes both the Price of the stock and the Volume of stock traded into consideration. So if we recall our fist post on these tests we had defined, these are as follows:
Test 1,1 – Low price and Low volume
Test 1,2 – Low price and expected volume
Test 1,3 – Low price and high volume
Test 2,1 – Expected price and low volume
Test 2,2 – Expected price and expected volume
Test 2,3 – Expected price and high volume
Test 3,1 – High price and low volume
Test 3,2 – High price and expected volume
Test 3,3 – High price and high volume
The -low, expected and high- buckets are based on whether the last day’s variation falls within the expected variation for that stock for the focused period of time, usually the past year or so. So if we want to match this with the Viracocha pair of lines, then just think that the Red line is the Price and the Yellow line is the Volume of traded stock. So we have (Price,Volume) in the test.
The Box Plot that I am showing is depicting the Price of the share as a percentage of its average, I did this only to be able to compare different shares on the same study. So a Y-value of 1.000 on the Boxplot would mean that the Median for that test is the same as the average price for that share. Obviously what we really want, at least if you are a reasonable trader, is to reduce your risk and to have the highest return on the trading. And that is what I am trying to show here.
The potential, when using Viracocha, is that we could have up to 8% when identifying the low share price against the high share price. This 8% difference is every time a trade is done. The purpose of this blog is to try to get real examples and put them through this process and learn how to extract that value as much as possible as often as possible.
Here is the DJIA through Viracocha, that second dip there in DJIA is the Sept 11 attack by the way… I did a special study on this because that was a really unexpected event and I wanted to see how it looked through Viracocha, but more on that in a later post. I had this one open and available so I used it to depict what those Tests I have been talking about mean for the Viracocha lines and how they relate to the explanations I have been doing – or trying to do. This particular time series doesn’t include absolutely all the types of tests, but there is a big number of them, and you could get the idea of how this works for the ones that are not depicted I hope. The white vertical dashed lines are the start and end of the period of time when a particular test is returning a ‘positive’ presence. Of course there may be times when we go for very short periods from one test to the other, and the software is calculating that, but I didn’t show here on the graph for ease of representation.