This example (and the other two) are a really excellent additions to the indicator library @Nicolas.
It’s very useful not just for outright trading in underlying assets but for options traders and In the Money and Out the Money probability expectations.
My post here explains more about the Option Pricing and the Black Scholes Pricing Model and the assumptions it makes: https://www.prorealcode.com/topic/options-probabilities-using-the-black-scholes-assume-a-normal-distribution/
In my search for probability cones I found this image below (from https://dthelp.dynamictrend.com/Probability_Envelope.htm) of a cone that also has vertical green dotted lines denoting options contract expiry dates. It would be great to know how your indicator could be coded so as to add IG Index’s Dow Jones/Wall Street DFB expiration dates for these following dates?
19/03/2021
16/04/2021
21/05/2021
Also is it at all possible to modify this normal distribution probability cone code, with components of the code for the Deviation Scaled Fisher Transform? That indicator attempts to convert prices into a Normal Gaussian probability density function — so that the probabilities in my Black Scholes link above can be made more realistic/reliable?
The theory behind the Ehler’s “Deviation Scaled Inverse Fisher Oscillator” indicator is that it attempts to remove the fat tails of a distribution. Fat tails distributions are distributions that have very statistically unlikely events occurring more frequently (hence the term “fat”) than the Normal Distribution suggests, eg S&P 500 returns. (Note: Assets like commodity prices have leptokurtic “Skinny Tail” distributions). Ehler’s indicator attempts to give a more perfect bell shaped Gaussian distribution which is necessary to trade low probability events at the extreme ends of the oscillator. This allows a price series to be placed into a probability distribution so that the probabilities of extreme moves corresponds to a normal standard deviation bell curve (distribution) which allows the prediction, in percentage terms, for the odds of a +2/-2 standard deviation move away from the mean price (centre of the bell curve).
So, basically I just wondered if your cone could be “hot rodded!?”
Cheers
Bard.
Ps/Apologies if this is double posted, I’d originally written this and not posted it last week and when I came back to it and posted it just now it didn’t appear in this thread or my “Topics with my Replies.”
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