The similarity system | Page 156 | Forex Factory

Options

Go to
Permalinks
Print Thread

Similar Threads

Similarity: A Practical Approach 859 replies

Similarity Trading - The ZZBB Method 215 replies

Rainbow similarity 256 replies

Similarity Stuff 17 replies

Directional Similarity 0 replies

Attachments: The similarity system
Exit Attachments

The similarity system

  • #3,101
  • Jul 18, 2013 4:07pm Jul 18, 2013 4:07pm
First thing to keep in mind is how stochastics is calculated. After the period is determined (in our case 300) then the three values that are relevant is the current close, the highest high and the lowest low of the period. Google and review the formula and you will see this. In short, stochastics is just a little graph that show where the current close sits in comparison to the highest high and the lowest low of the studied period. So for example...

If the highest high in the period (last 300 bars in our case) is 1.50 and the lowest low in the period is 1.30 and the price is currently at 1.40, then stochastic will be at 50%. This will be re calculated every time a new candle opens.

We are using a 300 period stochastics in our charts and we are comparing this to the EMA1. EMA1 will show nothing but the close of every candle, similar to a line chart. So what we have so far is...

EMA1 (candle close) --> Stochastics 300 (close compared to range of high-low).

In order to asses similarity, we are comparing both of the above by means of using a 24 period BB. By looking at the BB values on both, the EMA1 and the stock, we can see if the are aligned. If am correct, in a nutshell, this is what the StochDiff indicator is doing.

Is this clear so far?
Please pull my head out of my ass, I am running out of oxygen...
  • #3,102
  • Jul 18, 2013 4:12pm Jul 18, 2013 4:12pm
Quoting Dewey McG
{quote} OK, Figuring out where the zone will be and where price will probably be once the zone is full formed doesn't seem too hard. Pardon me for being slow (it's takes more repetition with me for things to sink in), but what do we do with this information? {image} {image}
So, in relation to other zones on the chart; you want to know where price will be once that zone finally appear. If you think she will be above, the you should expect the zone to serve as a temporary support area till it expires or is taken out!
  • #3,103
  • Jul 18, 2013 4:14pm Jul 18, 2013 4:14pm
Quoting Eurusdd
That zone on the 15min chart (above) is strong!
Sorry if this has been asked or discussed before but on what timeframes do you use the StochDifZones indicator?
Do you use it on higher timeframes than the M15?
  • #3,104
  • Jul 18, 2013 4:18pm Jul 18, 2013 4:18pm
Quoting spufuz
{quote} Sorry if this has been asked or discussed before but on what timeframes do you use the StochDifZones indicator? Do you use it on higher timeframes than the M15?
I use it on all time frames. I chose 15min because it is almost mid-way between what most people use here; from 1min to daily.
  • #3,105
  • Jul 18, 2013 4:20pm Jul 18, 2013 4:20pm
if you are in an uptrend/downtrend, you are expecting a zone to appear and the position of the zone - when it appears - is directly in-front of current price then that is a hint that the trend could turn around temporarily.
  • #3,106
  • Jul 18, 2013 4:24pm Jul 18, 2013 4:24pm
I know the CI method is, as my daughter would say, so yesterday, but I thought I would go ahead and share this. It takes me several times reading all this stuff to even start to make sense, so I was already working on putting to most relevant posts together for each method. Neio did the BB-Stochs method before I finished that one, so I decided to at least share this one.

If I missed anything important let me know and I can edit it.
Attached File(s)
File Type: pdf Similarity CI Method.pdf   2.5 MB | 1,762 downloads
  • #3,107
  • Jul 18, 2013 4:28pm Jul 18, 2013 4:28pm
right now - price is stalling because there is a new zone expected just below it zone and there is one already painting above it. You see what I mean. Price has to find a way!
  • #3,108
  • Jul 18, 2013 4:30pm Jul 18, 2013 4:30pm
Quoting Eurusdd
right now - price is stalling because there is a new zone expected just below it zone and there is one already painting above it. You see what I mean. Price has to find a way!
I'm long, expecting price to bounce off the big zone at the top.
  • #3,109
  • Jul 18, 2013 4:30pm Jul 18, 2013 4:30pm
Every time a new candle opens, the current 300th candle in the period becomes 301 and therefore out of the time range of the stochastic calculation. Eventually that candle that is left out will be the candle that holds either the highest high or the lowest low. When the new highest high and lowest low is taken into the stoch calculation, the high-low range changes, the stoch percentage calculation changes and therefore throws the BB out of whack... by simply drawing an area that encompasses the current candle, the 300th candle (at the moment), and the highest high and lowest low within that time period you can accurately tell how many candles before this happens.

Once this happened, you can also see how long before the stoch range changes again. If such time is still far away, then you know dissimilarity will begin to settle as the BB is recalculated. Given the BB is average related and we use it with 24 periods, then it will take 24 periods for the BB to catch up with one another and therefore no dissimilarity can exists for less than 24 candles.

The exemptions can happen if the price is moving near the stoch highest high or lowest low. This is because for now I am not able to say where price will go, so if the current candle breaks the high or the low of the current stoch period, then the range is changed and then an unpredicted dissimilarity will appear. In turn, this also signal an extension of the current dissimilarity. Even then you can continue to estimate how long this will last. Every time the range changes, the current dissimilarity will extend for at least another 24 candles...

Hope it makes sense. If anyone finds anything wrong with my theory, please read my signature! Thanks!
Please pull my head out of my ass, I am running out of oxygen...
  • #3,110
  • Jul 18, 2013 4:31pm Jul 18, 2013 4:31pm
Quoting spufuz
{quote} So that's why we got a new leg at ZZ and price heading upwards after dis-similarity began!? Price is now stuck between the zone to be born and the zone painting above. Actually, price has bounced back up around 1.3101 witch is the top of the zone not yet born! Am I getting you right!?
Well thanks for reading I think you got me but my assumptions can be wrong!

I don't have my charts now so I don't know what price is doing. But if you are telling me that there is a painting zone above and an unborn below then this would be a situation very similar to the trade example Eurusdd presented. You need to check what is PA now. If it breaks above the close of the DS candle then the assumption is PA should be above the unborn zone when it paints. Couple this with the example Eurusdd presented which is price cannot go down because it will meet the unborn zone then price will have to fulfill these 2 conditions and stay up possible taking out the currently painting zone.

There are gaps to my thinking so I can't offer further suggestions on the matter but know that figuring out where price will be when the new zone paints is the key. So if the current method/assumption of determining where price will be when the unborn paints my current frame work on this matter will collapse.

Edit : Gee you type a response and a new age appears by the time you are done
I want more brain power!
  • #3,111
  • Jul 18, 2013 4:33pm Jul 18, 2013 4:33pm
Quoting Eurusdd
right now - price is stalling because there is a new zone expected just below it zone and there is one already painting above it. You see what I mean. Price has to find a way!
I see the new expected zone acts as support, price is bouncing on it
  • #3,112
  • Jul 18, 2013 4:34pm Jul 18, 2013 4:34pm
Quoting cfdtaleong
{quote} There are gaps to my thinking so I can't offer further suggestions on the matter but know that figuring out where price will be when the new zone paints is the key. .
  • #3,113
  • Jul 18, 2013 4:37pm Jul 18, 2013 4:37pm
Hi All/Eurusdd,

Just doing some homework on zones. This one is on the 4H timeframe. 2 zones act as blocks.
Seems like the Upper Zone will be cleared out first before the Lower Zone... thus dictating direction of price. Have I analyse this right?

Below that, back to 15M but zoomed out. The zone above it (the "Strong One") is being hugged by price and seems more likely to be cleared before the zone below. This lines up with the 4H analysis. Both the 4H and 15M have high probability. Have I got this correct?
Attached Image(s) (click to enlarge)
Click to Enlarge Name: EURUSD.jpg Size: 522 KB
Click to Enlarge Name: EURUSD2.jpg Size: 564 KB
A pip is only worth it if you know how much you risked to earn it
  • #3,114
  • Jul 18, 2013 4:40pm Jul 18, 2013 4:40pm
Quoting Eurusdd
{quote}
Yes! I will finally understand once I figure out what means!

I so need my charts now.
I want more brain power!
  • #3,115
  • Jul 18, 2013 4:41pm Jul 18, 2013 4:41pm
Quoting vlady1974
Hi All/Eurusdd, Just doing some homework on zones. This one is on the 4H timeframe. 2 zones act as blocks. Seems like the Upper Zone will be cleared out first before the Lower Zone... thus dictating direction of price. Have I analyse this right? Below that, back to 15M but zoomed out. The zone above it (the "Strong One") is being hugged by price and seems more likely to be cleared before the zone below. This lines up with the 4H analysis. Both the 4H and 15M have high probability. Have I got this correct? {image} {image}
I think you should be good because that zone below - on the 15min chart, on the left - is a good one to take out!
  • #3,116
  • Jul 18, 2013 4:47pm Jul 18, 2013 4:47pm
Attached Image (click to enlarge)
Click to Enlarge Name: a.PNG Size: 69 KB

This is a beautiful case to analyze. A new zone is expected at BLUE and the one above could continue to YELLOW. The gap will be small for price. If price takes out the top one the we will be heading into a strong uptrend. Price cannot remain in the small gap for long. CLASSIC!!! We could be heading into a spike or strong move!!!

Some NEWS must be cooking in the kitchen.
  • #3,117
  • Jul 18, 2013 4:47pm Jul 18, 2013 4:47pm
Quoting Eurusdd
{quote} I think you should be good because that zone below - on the 15min chart, on the left - is a good one to take out!
To take out first?
A pip is only worth it if you know how much you risked to earn it
  • #3,118
  • Jul 18, 2013 4:48pm Jul 18, 2013 4:48pm
  •  Neio
  • Joined Oct 2012 | Status: Can't think outside?Enlarge the box | 688 Posts
Hi Eurusdd,

Are you able to confirm how we determine whether the Price will be above or below a dissimilarity zone once the period ends?

With the current zone that is forming I believed that Price will be below but now I am not so sure. I believe I know how to trade this once this point is confirmed.

Regards

Neio
An expert is a man who has made all the mistakes which can be made
  • #3,119
  • Jul 18, 2013 4:52pm Jul 18, 2013 4:52pm
This is to do with today's discussion on ZigZag Tops and Bottoms... ZZ Top and ZZ Bot

On the 15M, the most recent swing high is not yet "confirmed".
We devised some rules for confirmation:

  1. Price is marked by the ZigZag
  2. Price is outside the BB
  3. Stoch is outside the BB
  4. Price crosses the BB Midline AFTERWARDS

There are some exceptions that I've seen... so I would say this is 97% accurate

Below is a chart showing the most recent swing high or ZZ Top is possibly a fake or won't be the ZZ Top for much longer.... hopefully.

Attached Image (click to enlarge)
Click to Enlarge Name: EURUSD.jpg Size: 465 KB
A pip is only worth it if you know how much you risked to earn it
  • #3,120
  • Jul 18, 2013 4:56pm Jul 18, 2013 4:56pm
Quoting Eurusdd
{quote} So, in relation to other zones on the chart; you want to know where price will be once that zone finally appear. If you think she will be above, the you should expect the zone to serve as a temporary support area till it expires or is taken out!
I can see that when I draw in where the new zone will be
Attached Image (click to enlarge)
Click to Enlarge Name: unborn zone.jpg Size: 338 KB
3 traders viewing now