How to use the EPP statistic to improve your day trading

EPP Statistic

What is the EPP Statistic?

One of the statistics we publish is the EPP statistic or Encompass Previous Period statistic.  This statistic identifies how often a 30-Minute period or a 30-Minute bar is an encompassing bar?

Just what is an Encompassing Bar?  Perhaps you have heard it called an "Outside Bar" or an "Engulfing Bar".  It simply means that the bar touched or passed through the prior bar’s High AND Low.  In our case we compute it on each 30-Minute Bar or Period for the markets that we publish.  For a visual understanding please see the graphics below:

EPP Statistic
Encompassing Line with Bars

As you can see in the graphics, the green bars tag or pass through the previous red bar’s high and low.

How could a trader use the EPP statistic?

Could the EPP statistic help you determine a good time to trade would be?  Although it could help with this, our other statistics, like period range and InsidePP, would probably be better at helping to determine the best times to trade.  

The EPP statistic can help a trader get a feel for the market while trading.  You are likely to get a better understanding of this once you start using it in your trading.  

One good thing that you learn with the EPP statistic is that once one of the prior bar’s High or Low is tagged, you know the statistical likelihood of the other High or Low getting tagged.  This can help you determine risk, in some cases.  Once one of the edges of the previous 30-Minute bar is tagged you can determine the risk of going to the other edge. 

For example, let’s say your current 30-minute bar has a 5% EPP rate over the last 90 days.   Once either the High or the Low of the previous 30-minute bar is tagged you know you have a statistical likelihood of hitting the other edge at 5% or you can say the other edge is "Protected" at 95%.  That is pretty useful.  It gives you a feel for where the Market is NOT likely to go.

When you start combining it with other stats, like range, ONR tagging, IBP and IBP 1.5 tagging, it can be a powerful tool in your trading toolbox.

For a more detailed explanation, please watch our EPP Lesson in our Statistics for Trading Training Course.  You can use the link below to watch it.

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Thinking in Probabilities

Here at statsfortrading.com, we try to provide day traders statistical information because we believe that statistics are the basis for thinking in probabilities.  When you think in probabilities, your trading decisions are based on facts and not emotion.  

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