Core terms
Base rate
How often an outcome happened in a defined sample, before any further condition is applied. A base rate belongs to its definition, period and data source.
A base rate answers "how often, in this sample?" For example, in the FennEdge Gapper HOD study, 65.3% of stocks that gapped up 20% or more at the open closed below that open (438 of 671 observations, 2026-07-01 to 2026-10-02, FennEdge archive, as of 2026-10-02).
A base rate is useful as a starting point: before looking at a specific chart, what usually happened to situations like this one? It is not a forecast for one stock, and it says nothing about whether a trade on those situations made money after costs.
Base-rate neglect is the tendency to ignore the base rate when a vivid single case is in front of you, such as one striking chart posted online.
What traders should verify
Write the definition, period, sample size and source next to any base rate you use. Compare your own logged base rates with market base rates; your fills, costs and timing make them different numbers.
Do not conflate
A base rate from one period can change in another. A rate without n, period and source cannot be checked. A high rate of one outcome is not a trading rule.
Primary source
Primary sourceTversky and Kahneman, 1974