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The similarity system

  • #481
  • Jul 6, 2013 7:17am Jul 6, 2013 7:17am
Quoting neurus
Where is the indicator?

Post 393
Even though I walk through the darkest valley, I will fear no evil
  • #482
  • Jul 6, 2013 7:20am Jul 6, 2013 7:20am
I believe you figured out the patterns faster than I did Lirbig. I gained insights into some of the concepts from your posts. My appreciation of the various trade types goes something like this:

* If one enters at a dissimilarity, we have a lower probability trade (as we dont know where the price will go from that point) except there are very strong reasons giving us a bias for one direction.
* If one enters at a similarity which happened after a single dissimilarity 'event' or dissimilarity 'period', the trade has better probability. We enter looking to exit at the price level of the first dissimilarity event

http://www.forexfactory.com/attachment.php?attachmentid=1223555&stc=1&thumb=1&d=1372522044 [The order in the image (going forward in time) is yellow circle 1, yellow circle 2, yellow circle 3, yellow circle 4 then blue circle. Enter at blue circle, exit at yellow circle 1 area for a high probability trade]

For what its worth I hope that helped..
  • #483
  • Jul 6, 2013 7:26am Jul 6, 2013 7:26am
Quoting Thoughts
I believe you figured out the patterns faster than I did Lirbig. I gained insights into some of the concepts from your posts. My appreciation of the various trade types goes something like this: * If one enters at a dissimilarity, we have a lower probability trade (as we dont know where the price will go from that point) except there are very strong reasons giving us a bias for one direction. * If one enters at a similarity which happened after a single dissimilarity 'event' or dissimilarity 'period', the trade has better probability. We enter looking...
You got it right. Only one but after you spot similiarity and enter a trade we dont know how long is it gonna be until price will reach dissamiliarity point
Even though I walk through the darkest valley, I will fear no evil
  • #484
  • Jul 6, 2013 7:32am Jul 6, 2013 7:32am
Quoting monocor
{quote} You got it right. Only one but after you spot similiarity and enter a trade we dont know how long is it gonna be until price will reach dissamiliarity point
Thats not really a problem..all you need to do is some creative thinking..
  • #485
  • Jul 6, 2013 7:36am Jul 6, 2013 7:36am
just my observation....

Stoch hitting 100 or 0 will cause dissimilarity and we shouldnt use that as a target point for trade. We should wait for it to normalise first in the range of 20-80, before looking for dissimilarity target point.
  • #486
  • Jul 6, 2013 8:36am Jul 6, 2013 8:36am
Excellent post and spot on!

Quoting Thoughts
I believe you figured out the patterns faster than I did Lirbig. I gained insights into some of the concepts from your posts. My appreciation of the various trade types goes something like this: * If one enters at a dissimilarity, we have a lower probability trade (as we dont know where the price will go from that point) except there are very strong reasons giving us a bias for one direction. * If one enters at a similarity which happened after a single dissimilarity 'event' or dissimilarity 'period', the trade has better probability. We enter looking...
  • #487
  • Edited 9:12am Jul 6, 2013 8:53am | Edited 9:12am
  •  Neio
  • Joined Oct 2012 | Status: Can't think outside?Enlarge the box | 688 Posts
Interesting discussion. Here is my view.

Eursdd pointed out that 95% of the time both the Price and Stoch should be similar and that we should trade the SIMILARITY rather than the DISSIMILARITY. The problem is how do you know which way to enter. If the Stoch is at or near the extremes of its movement (0 or 100) then it can't go past those points.

For example if the STOCH has gone close or near to 0 then the STOCH is limited in its downward movement. Yes it is true that PRICE could go further down even though the STOCH cannot move down further but if we believe what Eursdd said that 95% they will be similar then that can only mean one of two things. That PRICE will either have to move sideways or UP. If PRICE were to keep on going down the STOCH would not be able to follow it.
An expert is a man who has made all the mistakes which can be made
  • #488
  • Jul 6, 2013 9:01am Jul 6, 2013 9:01am
  •  Neio
  • Joined Oct 2012 | Status: Can't think outside?Enlarge the box | 688 Posts
Quoting Thoughts
I believe you figured out the patterns faster than I did Lirbig. I gained insights into some of the concepts from your posts. My appreciation of the various trade types goes something like this: * If one enters at a dissimilarity, we have a lower probability trade (as we dont know where the price will go from that point) except there are very strong reasons giving us a bias for one direction. * If one enters at a similarity which happened after a single dissimilarity 'event' or dissimilarity 'period', the trade has better probability. We enter looking...

I agree with this point. Here is a thought. If we are confident that the price will eventually return to that point. Could we not just take trades both ways. Then when price moves in one direction we continue to keep both trades open and eventually cash out on one knowing that are other one will eventually come back?

Or could we just take a chance on one way know that if we are wrong that it will eventually come back?

I know there are no guarantees. Just thinking out loud.
An expert is a man who has made all the mistakes which can be made
  • #489
  • Jul 6, 2013 9:03am Jul 6, 2013 9:03am
  •  Neio
  • Joined Oct 2012 | Status: Can't think outside?Enlarge the box | 688 Posts
Quoting Barbossa
{quote} Interesting question. I'd guess your trade premise is based on the expectation of a future similarity. If the stochastic and the close price chart are to remain similar, the price should rise back, as a continued downtrend would cause a dissimilarity (since the stochastic can't fall below 0 and hence can't keep making lower lows).
Sorry just read your post. I agree.
An expert is a man who has made all the mistakes which can be made
  • #490
  • Jul 6, 2013 9:18am Jul 6, 2013 9:18am
Quoting Neio
Interesting discussion. Here is my view. Eursdd pointed out that 95% of the time both the Price and Stoch should be similar and that we should trade the SIMILARITY rather than the DISSIMILARITY. The problem is how do you know which way to enter. If the Stoch is at or near the extremes of its movement (0 or 100) then it can't go past those points. For example if the STOCH has gone close or near to 0 then the STOCH is limited in its downward movement. Yes it is true that PRICE could go further down even though the STOCH cannot move down further but...

That's essentially betting on the premise that the price would remain range-bound in the range defined by the last N bars, where N is the period of the Stochastic - 300 in this case. However, the price cannot remain range-bound forever, so the Stochastic reading not a reason enough by itself is to get into a trade. That's what other clues (e.g. Zig-Zag or Bollinger Bands) are for.
  • #491
  • Jul 6, 2013 9:49am Jul 6, 2013 9:49am
Quoting Barbossa
{quote} That's essentially betting on the premise that the price would remain range-bound in the range defined by the last N bars, where N is the period of the Stochastic - 300 in this case. However, the price cannot remain range-bound forever, so the Stochastic reading not a reason enough by itself is to get into a trade. That's what other clues (e.g. Zig-Zag or Bollinger Bands) are for.
Barbossa, both of you have valid points!
This is just the core principle. When I am sure that the room is ok with the principle, I will then introduce the part that allows you to determine which trades to take and those that you should ignore. If your broker allows you to hedge, then there is a twist to this system!
I am still watching!!!
  • #492
  • Jul 6, 2013 10:19am Jul 6, 2013 10:19am
Hello everyone. Very interesting thread. I am trying very hard to understand but having problems. I need some help to see if my understanding is correct but first please let me apologize because I am a very slow learner.

Question A
Would it be correct for me to phrase trading principle of this system in the following steps?

1)Look for dis-similarity and the point of the dis-similarity will be the profit target.
2)After spotting dis-similarity we wait for next similarity to happen again.
3a)If next similarity happen above dis-similarity point we want to sell because we expect price to return to that point.
3b)If next similarity happen below dis-similarity point we want to buy because we expect price to return to that point.

Am I correct on this? Sorry i have to ask because my efforts at understanding the topic not working very well.

Question B
I do not have MT4 and cannot seem to find the settings for the indicators used in threads.Very sorry i am asking maybe I missed it but I anyone can help please do.

1)EMA period 1 yes?
2)Bollinger bands standard settings 20 periods 2 deviations yes?
3)Not slow stoch or fast stoch, but normal stoch at 300 periods 1%k and 1%d yes?

THANK YOU VERY VERY MUCH FOR HELP
I want more brain power!
  • #493
  • Jul 6, 2013 10:22am Jul 6, 2013 10:22am
Quoting cfdtaleong
Hello everyone. Very interesting thread. I am trying very hard to understand but having problems. I need some help to see if my understanding is correct but first please let me apologize because I am a very slow learner. Question A Would it be correct for me to phrase trading principle of this system in the following steps? 1)Look for dis-similarity and the point of the dis-similarity will be the profit target. 2)After spotting dis-similarity we wait for next similarity to happen again. 3a)If next similarity happen above dis-similarity point we...
For the 15min chart. period for band is 24, optimally. This number was obtained after processing all past data I could get my hands on for the 15min chart!!!! So unless we go very far into the future, period 24 is optimal.
  • #494
  • Jul 6, 2013 11:18am Jul 6, 2013 11:18am
Quoting Lirbig Nubee
I really want to move on with discussion. Already covered Three out of Five Point to consider before trade taken. ( we cover this later) So far I have posted only ONE method by Eurusdd (http://www.forexfactory.com/eurusdd) System, that is Similarity to dissimilarity in stoch and ema reading in relation to BB. {quote} Second Method covered in this Dissimilarity and catch up {quote} Look at the attached Chart. If you tries to use first method( Similarity to Dissimilarity Method ) you will get stopped out. Choose the Second Therefore Second...
Price didn't get back to point A because dissamilarity started at the left lower corner of rectangle at your chart, and arround point A we got similiarity and price went down to the dissamiliarity point
Even though I walk through the darkest valley, I will fear no evil
  • #495
  • Jul 6, 2013 12:11pm Jul 6, 2013 12:11pm
Quoting Eurusdd
{quote} For the 15min chart. period for band is 24, optimally. This number was obtained after processing all past data I could get my hands on for the 15min chart!!!! So unless we go very far into the future, period 24 is optimal.
Thank you very much for information. I will look at chart for visual back test to see if my understanding make sense
I want more brain power!
  • #496
  • Jul 6, 2013 12:50pm Jul 6, 2013 12:50pm
There have been quite a lot of posts in the last few days mostly, how to trade this (similarity/wormhole/black hole/loophole) I.E. where do I enter, sl, tp, ect...

I am of the opinion you do not need any more additions to what has been presented already to be a very highly profitable trader with THIS method. As a matter of fact, if you took the time to analyze the pics in post# 1 you would see EXACTLY when to enter, where to enter and where to get out along with where to place your stop. If you are using the cycle indicator. The same goes with the BB method.

​Between the 2 methods you have a 90-97% congruence of price action and just those two indicators, that's a 3-10% DIS-similarity. Think about that for a moment, or longer.

Using the pic in post# 1 I will walk through how I would trade this according to the Similarity.

1. A and B are signals on M1 chart

2. A and B do not show up on M5 chart, after M5 candle closes.

3. Price moves down from B past A and not too long after we get swing point C

4. So on M1 chart you have signals A, B and C but on M5 chart no A or B signal just C.

5. First, the name of method is SIMILARITY, so I want to trade WITH similarity of the indicator and price action.

6. Where is my first Similarity? Point C.

7. C is where both charts match signals, so what do I want to do and why?

8. I want to go LONG! Why? because the market was NOT similar at those points A and B and the last signal I got on the M1 and M5 chart that was similar is a LONG signal.

With a 90% similarity I could just place a market order on the close of the signal bar to go LONG with a stop just under the new swing low at point C. (that is an option, a very good option) still low risk trade without looking at M1 chart.

9. But if you did notice the M1 chart you would see a 1 2 3 breakout pattern has formed which is a confirmed entry with a tighter stop but with same take profit points; A and B.

Personally, I would just target Point B and not point A because, A was already hit on the way down from B to C.

Another possible option is to find entries using the cycle method on the M5 and M15 along with the BB method on M15 to confirm a black hole, wormhole.....

Point being there are many ways to trade this, similarity to DIS-similarity, DIS-similarity to similarity. Look through the charts posted and you will see examples of both along with commentary describing still more methods to take advantage of the market.

I would advise everyone going back to the first post and then to the first post of your preferred indicator method and not move on until you fully comprehend what EURUSDD was pointing out. This post might even help, hopefully.

Good trading.
Attached Image (click to enlarge)
Click to Enlarge Name: cycle 2.png Size: 84 KB
  • #497
  • Jul 6, 2013 1:07pm Jul 6, 2013 1:07pm
I so needed that thought walk through. I am of the opinion that I am not brightest light bulb around here so this post really helps. Thank you.
I want more brain power!
  • #498
  • Jul 6, 2013 1:14pm Jul 6, 2013 1:14pm
Quoting Baillie
There have been quite a lot of posts in the last few days mostly, how to trade this (similarity/wormhole/black hole/loophole) I.E. where do I enter, sl, tp, ect... I am of the opinion you do not need any more additions to what has been presented already to be a very highly profitable trader with THIS method. As a matter of fact, if you took the time to analyze the pics in post# 1 you would see EXACTLY when to enter, where to enter and where to get out along with where to place your stop. If you are using the cycle indicator. The same goes with the...
I know what your saying buddy, we all need to nail down the basic concept, however there are other components we can you. Even Eurusdd uses other confluences which he can not tell us, to perform like a super trader.

I was an avid user of the cycle identifier before this thread, and anyone that knows the behaviour of that indy, it is not the most stable method even with the dis-similarity, Eurusdd was using that as the most basic concept for all of us to grab.

Your suggestion of stacking the bb method with the cycle identifier is the next step.
  • #499
  • Jul 6, 2013 2:18pm Jul 6, 2013 2:18pm
Quoting Madmoney
{quote}I was an avid user of the cycle identifier before this thread, and anyone that knows the behaviour of that indy, it is not the most stable method even with the dis-similarity
Excuse me for asking, but if the ci is so erractic why were you an avid user of it? Never heard of it before this thread..
  • #500
  • Jul 6, 2013 2:22pm Jul 6, 2013 2:22pm
Quoting Madmoney
{quote} I know what your saying buddy, we all need to nail down the basic concept, however there are other components we can you. Even Eurusdd uses other confluences which he can not tell us, to perform like a super trader. I was an avid user of the cycle identifier before this thread, and anyone that knows the behaviour of that indy, it is not the most stable method even with the dis-similarity, Eurusdd was using that as the most basic concept for all of us to grab. Your suggestion of stacking the bb method with the cycle identifier is the next...
Thanks Bro, I agree with you, was just pointing out from the questions that traders were asking about sl, tp, which way to trade, that those answers are there if you don't go too fast through the thread.
I think that even if Eurusdd does not tell us the other things, this concept alone should spark a thought process in itself, that will lead us to those things or very close.
I am still looking at combining the two methods, have to have 3 charts open for best view.
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