Grey1,
I did qualify my comment with " to a reasonable level of statistical accuracy". If you use 1SD which is 68%, and the data breaks the 1SD line, there is a 16% ( 1/2 of 32%) chance that the trend has not broken. If you use 2SD, which is 95%, and the data breaks the 2SD line, there is a 2.5% (1/2 of 5%) chance that the trend has not broken.
However, your point is well made. About 10 years ago when I was heavily into traded options on the FTSE, the data broke the 2SD line going down. I bought a shed load of Puts and lost a lot as I had fallen into a "Bear Trap" I learnt an expensive lesson that the market doesn't play by my rules!
regards
I did qualify my comment with " to a reasonable level of statistical accuracy". If you use 1SD which is 68%, and the data breaks the 1SD line, there is a 16% ( 1/2 of 32%) chance that the trend has not broken. If you use 2SD, which is 95%, and the data breaks the 2SD line, there is a 2.5% (1/2 of 5%) chance that the trend has not broken.
However, your point is well made. About 10 years ago when I was heavily into traded options on the FTSE, the data broke the 2SD line going down. I bought a shed load of Puts and lost a lot as I had fallen into a "Bear Trap" I learnt an expensive lesson that the market doesn't play by my rules!
regards