Similarity Trading - The ZZBB Method

Dissimilarity Zones

The 15M shows an unborn Zone under the 300EMA. This means that if the 300EMA is tested and FAILS AND the Dissimilarity Ends then price will be above the born zone and it's a pretty big one. It will attract price and could suck price down to 1.33107

The 5M shows a born zone which has much more gravitas over the unborn zone. 1.33158 is the price of the lower boundary.
Price could go higher and *3* semafor repaints for a ZZTop touching 300EMA. A failure of the 300EMA could then push price south and produce a *3* ZZBottom
Otherwise, if the zone is cleared BEFORE a challenge of 300EMA then that will align with the 15M timeframe, which is a scenario I would prefer.

Just woke up to find the 1H has repainted.
It's now on a DS level 3304. All trades underwater and what I said about the born zone sucking down price materialised overnight during Asian session.
1H is still telling me next sequence is ZZT... Will have to evaluate lower TFs for my next move. Charts later.
I hate this 1H transition from above 300EMA to below... Everything is not clear cut.

We are at 1.3270 Zone so we should see a bounce.... but I do believe we could be in a downtrend now so u need to be careful keep opening positions!!!

If we get a bounce here then could go back below 1.3205

GL

Okay, back on screen.

Here's what I am seeing. The 4H is dictating all proceedings. I wasn't using 4H as much on Attempt #1 but it's been the driver since the 19th August. The 1H long trend can just be seen within the 4H movement... but the high of 1.345X was the clear ZZT wanting a ZZB that has taken 10 days to print.

That's clearly been my mistake to ignore this higher time frame.

At this point, whilst it's reasonable to expect a ZZT as the next sequence, the close needs to be above the 300EMA for any bullish bias to remain.

The next bar will be crucial, which is due at 10am GMT (corrected). It can either continue the break (open above 300EMA and close below it) which confirms bear bias and I close all longs. Or it can open at or below 300EMA and then close back well above. Checking the last ZZBottom, this is what happened.

No decision yet on what to do medium term but I stupidly opened another long at 3312 looking for 3349. Not trading well at all.

Here is the 1H view that confirms the 4H.

ZZB semafor *3* repainted and now ties with the 4H. A bounce is expected but where the ZZT will appear is a guessing game now.
Price has broken 300EMA which directionally means a bear bias. This is not confirmed yet on the 4H although price has pierced 300EMA on that tf but not closed below it yet. If 1H and 4H are in sync then the bias as it stands should be bearish.

Having said that, the only way I can come out of my longs is to wait for a "One Last Kiss" of the 300EMA on the 1H. Initially this is at 1.3337 which is where all the fun began. If it gets there, I will exit and take the hit. What I'm not sure of is whether to counter trend it up there.

Still trying to remain unemotional about this. Difficult

The 15M view gives some glimmer of hope for my Longs.

The born zone could attract price and would lend itself to the One Last Kiss of the 1H EMA. That is, price must clear the entire zone from the bottom up.
The price targets all cluster around the 1.3337 mark as per the 1H analysis.

The safe option would be to sit tight and wait for price to come back.
The aggressive option would be to counter trade it back up there. What I am bearing in mind is the 4H gives a window that started at 6am London time. So at 10am the new candle can give further clues as to what the lower time frames could do.

Interesting viewing on the 5M. The bounce that has printed a ZZB and a *3* semafor is inside the Bollinger Band which is technically a "black hole" price. For this to be resolved, price needs to move away from it before being sucked back in. Since it is a ZZB, it must be an upward move.

Hmmm...

Plan of Action

All trades underwater. Safest action is to close all trades now and crystalise the risk.
This may not be the smartest option but the safest one.

The analysis thus far indicates a potential rise upwards. The question posed is whether to trade this move or not.
Waiting for this move to occur will be the smarter move as it could reduce the risk to be crystalised. The potential risk is a further downward move.

===========
10am has started. This is a 4 hour play. I will wait for price to rise. If price travels below 3260 I will think about closing. If it stays above 60 I will continue to wait. Targets are the 5M Dissimilarity Zone with an upper limit of 1.3337. If I reach near enough that price, I will close all longs.

The Euro has hit 23.6% fib of the last move down, which with an aggressive move down could be enough...!

The bounce off 130. on EJ could help push higher...

Good Luck mate

This is how I trade and have set goals and targets per day and look what results can be achieved with good MM!!

Should open you eyes

GL

Nice! I do something very similar on my normal account.
Your max drawdown implies 3 pip SL? ($15.27 x 0.2)

This is just an example mate, not mine...

That's some brutal DD. I thought your DD limit was going to be 8-10%? Trading back to DS seems to take a backseat on big event days (Prelim US GDP). Remind me not to try it on those days!

Well I've spent the last days in scalping/recovery mode after the disastrous start to this.

The problem is that I am diluting the "method" as I am using candlesticks, fibs and pivots in the background now as well as the ZZBB method. But I think if I can get back to starting base then I can remove the other stuff as I go.

Anyway... the 4H had a ZZBB setup that involved previous support at 1.31894. I placed a short targeting this price from 1.3241ish but I got rid of it as I wanted to manage the trades and didn't want to risk any more DDs. Lost an opportunity there. But once price got there, you'll see from the trades I took today that I went long from 3187.

Today's Recap

1H
The 1H shows that a DS zone that provided support for the consolidation move but finally sucked down price. The interesting thing is that the down bar caused another dissimilarity zone... which will first repulse price and then suck down price.

If you are able to extrapolate... it must mean that price will go up until it hits a point where the down move will be attractive enough to attract price down to 3189 again.
A decent price to travel to is the 300EMA line. So this is congruent with the 4H timeframe.

15M
This timeframe shows that there is a zone above that is also congruent to the 1H. It's providing a price target BUT it's above the 300EMA in the 15M timeframe. You have to remember that the 15M 300EMA is lower than the 1H 300EMA.... so... it's a viable price target for countertrend longs.

Price is currently hitting an Unborn Zone which will be resistance. It's created a Semafor *2* which means I expect price to retrace probably back to 3188, 3200 or the Bollinger Mid.


PLAN FOR NEXT WEEK
Depending on the time either Sunday or Monday, I could try and play for some longs and target 3262, 3275, 3318 and ultimately 3337
I will be aiming for at least 40-70 pips per day.

Hey mate, I never set a DD limit. My attempt #1 didn't use SLs and I was able to do fine. This attempt not so good. But as I said to Josh, I'm still trying to work out how to set targets with this method. At the moment, most of the trades are triggered for ENTRY, not exits and not stop/losses. I'll do that in due course.

Today's Recap

5M
Just to finish the recap on the lower timeframes, I wanted to post this. The 5M has posted a great DS target once the turning point ZZB was established. In fact there are two zone targets and the 300EMA on this timeframe.

It seems this is playing out.

Just about to go to bed and I'm unsure whether to set a TP and SL or to let it play.
The 1M shows that a zone below needs to be taken out, meaning price will test lows again.
The 1H and 4H indicate higher. Initial targets point to 324Xish but if the 4H ZZB is confirmed it may be worth holding onto some of the longs.

Well, let's see what Asia turns out in the morning.

As an aside, got some new Trading books that I will be reading - one of which looks like a classic London Breakout method. I wonder if I should apply that kind of stuff to this method? Hmmm. I'll sleep on it.

Targets set to TP at top of 5M DS zone. 3334 set for 2 longs but I might re-evaluate. Shorts could be used for counter trend moves on the 5M timeframe.