Similarity Trading - The ZZBB Method

Cheers Buddy! Catch you around here soon!

30M
I don't often do analysis on the thirty minute timeframe but this one couldn't be ignored. Basically I'm looking for reasons for where price would make the turn.

I've started compiling my thoughts into a document regarding the "Method" which I will publish here soon.
It will probably take me another 1-2 days to post this current version. I'll then release updates as I change my mind

Looking forward in reading that!

I am working on the 30M today with fine tuning on the 5M. I'm using the 300EMA and the DS Zone top level as the Short Targets.
Pending Shorts on 1.3243 and 1.3246

I took profits off the UJ trade and entered another pending short within the range of the last leg up. The current leg printed a ZZB on the 5M so it's heading back up which should hopefully catch my short. The upper limit of the leg is the DS Zone top level.

You inspired me to do it properly.

I only have one concern.... it doesn't mean that the method "works".
I know that part of it works for me. I don't know how to formulate that yet.

Hence why I've created this thread - mainly for myself. But if someone else can cast fresh eyes on it then you never know if something new and significant can be contributed. Heck, an idea I gave to one of the Similarity posters has become an EA

Okay just because it's on my mind this morning:

PREREQUISITES

1. MT4 ZigZag Indicator
2. 3 Level MTF Semafor

Set the Zig Zag to 24 periods, set the Semafor to default settings.
I would advise to create a Template of the Price Chart that you can then apply to new charts.
Create a new worksheet template so that you have 4H, 1H, 30M, 15M, 5M on MT4 for EURUSD or whatever pair you are analysing.
If you want to trade cross-currencies, then create another worksheet template with 1 pair set to 1H. You will have to change the timeframe manually.

FIRST STEPS

1. Review the DAILY, 4H and 1H
2. Write down the most RECENT/LAST swing: ZZTOP or ZZBOT for each timeframe.
3. Deduct which swing is aligned and which is not:
   1. ZZT for Daily, 4H and 1H means the trend is DOWN and trades are biased Short looking for a ZZBottom to occur on that timeframe
   2. ZZT for 2 out of 3 means that the swing on the highest timeframe will be the strongest or will need to come first in order for the direction to be aligned.

I've had a cursory look at my recent trades in the last 3 days and found that losing trades were against the 4H timeframe. Based on recent discussions on other threads it would be a good idea to try and set a mechanical pre-trade process to eliminate inconsistent approaches.

In order to know that trend, we must establish the trend across all time frames.
I often find that many other threads have different traders disagreeing on the trend because of the context of their perspective. A scalper on a 1M and 5M will not have the same trend as a position trader on 1H and 4H. But if the 4H was actually biased Down, the interesting thing would be to find out how many successful scalps were Shorts for the 1M/5M scalper???

So back to the swings....since the ZigZag is a measure of the current price swings then it makes sense to jump onto a swing that is in the same direction from the highest trend to the 1H. I've mentioned previously that I consider the 1H to be different to 60M due to where it stands on the fractal transitioning... ie. 24 hours vs 60 minutes / 60 seconds / 60 miliseconds (ie. 60 60 60 against 24). So 1H,2H,4H would resolve to a Daily Bar. But a Daily Bar in hours does not resolve to a Month Bar because you have different Days in a Month. I therefore want a swing to reflect the most consistent element of time being measured in that price bar.

If a swing is down on the 4H and 1H and Daily.... then I don't expect 2 new swings to happen within 60 minutes of it occuring... see what I mean? I would expect that a Daily Swing ZZT to be countered in possibly 2 or 3 days! A 4H swing to occur over 1-2 days... etc etc. This can therefore help with setting your bias. You can also test how often you are wrong when compared to the daily bias.

SECOND STEP
This is actually the more difficult step. Once you have established your bias, you need to decide how you will trade:

1. With the trend
2. Counter the trend
3. Wait

Every swing is different and since this largely depends on the timeframe, your personality will dictate your decision.
If you are a day trader, chances are you will enter and hold a trade for a few hours but no more than a day.
If you are an hourly trader.... you would probably place 2-5 trades a session (ie. Asian, London, New York)..... etc

The question then is.... how will you grab the next trading opportunity? This is where it becomes interesting for any trader.... some don't have patience and will want to dive in. I know this of myself in the past. The ability to choose between #1 and #2 will depend on other indicators you employ to let you know when to get out of the trade. #3 is free.

1. If you trade with the trend.... then you would be looking to enter as soon as a new Swing, in line with your trend in Step 1, is formed.
2. If you trade counter trend, then you would enter on the next new swing (which is often counter)
3. If you wait.... I would try and extrapolate where the next MAJOR SWING is likely to occurr (more on this later).

In either case, #1 or #2.... once you have decided to enter..... I would then jump onto the lower timeframes and basically repeat the process finding the dominant trend and see if you can enter on the swing that is aligned to your directional bias. If you are short, then for goodness sake, don't go short just as a ZZB has formed on a 30M where the last ZZT was like 60 or 80 pips away! Price will go against you!

In this way, you could go outside the method and start using things like Fibonacci and Pivot Points so you are aware of different support/resistance levels.
By all means do this. To keep within the method/style, I use the 300EMA and I use the DS Zones (top and bottom price) from Ralome's indicator. Ralome's indicator are found in the The Similarity System thread and the Similarity: A Practical Approach thread.

THIRD STEP

Okay, we've gotten this far. The third step is really just an extension of the 2nd step. But it allows for more creativity on your part, as a trader.
It's all to do with EXITS.

Setting targets using this "STYLE" has always been related to Similarity and Dissimilarity, as originally defined by Eurusdd in his thread. I don't presume to understand the mathematical concepts behind this phenomenon. All I know is the following, from observation:

1. Price Action always returns to a price that started a Dissimilarity (DS)
2. DS, when it occurs at a ZZT or ZZB, is very powerful
3. At a DS, price tends to move away from it and reaches some extreme further in time BEFORE it eventually returns to that price

I like to describe this as a rubber band effect. And so therefore, I can really be setting up 2 trades.... once I exit the current one (defined in Steps 1 and 2) I can then look forward or ahead to discovering reasons to set up the next trade.

If there was a previous DS Zone price level that falls in the path of a future ZZTop or Bottom, then I can set my long term Take Profit target to either the start of the Zone or the end of the Zone. More often than not, DS Zones get taken out completely.

In the early stages of learning this, I didn't pay attention to these zones. There is an added complexity of whether or not the zone is born/unborn (pregnant as someone described it, LOL) and that adds a bunch of other complications.... more on that later. The bottom line is.... we can use DS Zones as targets. If we locate these zones and they are in the path of the next ZZ swing.... then we look to go for it.

The next sub-stage is to then apply risk management which to date, I've not done alot on with Attempt #1 or #2 (shit, you can see the drawdowns as evidence of this) but from now on I will be using alot more of it. Not all the time, but most of the time. Well... that's the plan anyway! LOL.

Okay, let's get an update.

My UJ Long is now underwater after being up for a little while. The EU has shot up and looks like it will clear the small DS Zone, with another one forming below it. There is another formed DS Zone above the small one and I am using this as the Take Profit Target and also the entry for a Short. (see previous post on the 30M analysis)

The interesting thing to note about this is that even though the ZigZag / Semafor indicator is screaming that a ZZTop has formed, the 4H has not formed a ZZT which means that the 1H (even thought it has formed a ZZT) is not in line yet. I will continue to hold this Long.... possibly move up stops.

closed the UJ w/ small loss.
closed EU as I'm being conservative today. TP was the bottom of the target DS Zone. This was on Pivot resistance levels so i am told. There you go!

Comparing these 2 charts, one from Yesterday one from Now

I'm highlighting this to demonstrate the Repainting Phenomenon and how a larger timeframe view + DS targets can help make better evaluations on the Change In Trend (C.I.T).

The 1stshot shows Semafor *3* and ZZT which I marked as a potential Semafor 2. The placement of the 2nd Semafor *2* is a more advanced technique where I look at the shape of the bollinger band and try and guess where a CIT is likely to happen.

The only thing different between the two is the final ZZT point. I have closed my longs now, but there could be further upside.

EDIT:
30M Zone target done. Shorts triggered. Could go higher to 3280, got more Shorts around 3260ish. But here's the chart for comparative purposes

Shorts on EU average 1.32577
Looking for 150 pips target

The ZZBB Method Version 1.0

Hi Valady
Thank you for your effort .
Bülent.

Thanks for all your work. Its great to have something set down to test out.

For whatever reason, I have started doubting myself and closed some shorts and went long then closed longs.
I'm not entirely sure what has influenced me in the last 2 hours but I thought I'd post this as a cautionary marker.
It's real, real emotions - I'm treating this like a real account.

Thank you for your tremendous effort in sharing your knowledge and passion.
Will be reading this thoroughly

Subscribing post. Was wondering why I'm not getting notifications lol

Well today was a terrible day to feck around with the Yen crosses. Grrr
Not one trade went right. Grr.

I can only laugh about it.

It's hard.