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## 4. How Prices Move (II)

The application of probability to sequences of rises or falls, even though of interest, was a rather trivial use of probability. When we come to the numerical values of these changes, we need to examine how probabilities can be arrived at by studying the distribution of price changes. By distribution we mean an analysis of the way in which the data is scattered about the mean value. It is necessary to introduce the statistical concept of the normal distribution in order to understand what can be deduced from a study of the actual value of the daily changes.

Note that it is not necessary to carry out laborious calculations – this can be done quite simply in a spreadsheet.

## The Normal Distribution

As an example, the ...

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