Frequency Distribution - Explained
What is a Frequency Distribution?
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Table of ContentsWhat is a Frequency Distribution?How is a Frequency Distribution Used?Visual RepresentationFrequency Distributions in TradingAcademic Research on a Frequency Distribution
What is a Frequency Distribution?
A frequency distribution is a chart or list that presents the frequency of different outcomes in a given sample. The frequency distribution presents an overview of all the values or variables in a given sample that the frequency (number of times) they occur. A frequency distribution can use a list, table or graph to represent the frequency of outcomes. This distribution presents a snapshot of patterns and the occurrence of a given data. The interval size of outcomes in a sample is determined by the type of data being analyzed.
How is a Frequency Distribution Used?
Frequency distributions are common in statistics, they represent the intervals between various outcomes in a given sample. Each outcome is graphically represented to show the number of times they occur with a group of outcomes and the interval at which they occur. A frequency distribution is a statistical tool that presents a snapshot of the patterns and trends of a given data set. Frequency distributions are often used by analysts to visualize their observations and noticeable trends in a given sample.
Visual representation is central to frequency distribution, this means that the observations and outcomes within a given sample must be visually represented. Frequency distributions can use histograms, bar charts or tables to present the outcomes in a given sample and the intervals at which they occur. When any of these visual representations are used, they present the frequency and intervals of outcomes of a given sample using the y and x-axis. Hile the y-axis is the frequency count, the x-axis represents the observed variables.
Frequency Distributions in Trading
There are certain cases where market traders make use of frequency distributions. Although, the use of frequency distribution is not a common practice in the investment market, there are exceptions. Richard D. Wyckoff is a trader who pioneered the use of frequency distributions in the investment world, traders and investment firms that follow this approach are regarded as followers of Richard D. Wyckoff. Traders and investment firms use frequency distributions when there is a need to note price trends and patterns of securities. Using the y and x-axis, traders identify whether there is an uptrend or downtrend in the market.
Academic Research on a Frequency Distribution