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The similarity system

  • #5,761
  • Aug 15, 2014 11:01pm Aug 15, 2014 11:01pm
Quoting vlady1974
{quote} Neither am I mate, but you can always begin by defining the territory. Were talking about Price and Time. Setting aside mathematics, what do we know? TIME: Asian, London, New York = 1Day Time Equivalents: Day = 24 Hours = 60 Min is the first Time Set Larger than Day = Week (5 days + 3 hours) = Months is the second Time Set Price Sets: For each element of time, the exists Open High Low Close. Lets start there! The tick represents an actual trade that equated sellers to buyers at that price at that time.
Great Vlady. And idea of Burnssss about Stochastic process is nice for my starting point. Thanks.
  • #5,762
  • Aug 15, 2014 11:20pm Aug 15, 2014 11:20pm
Quoting vlady1974
{quote} So the printing of price on a screen... What is that? By this I mean, if you place a Fibonacci on a 5M does it have an effect on price/time? But what if your chart was just dots and not candlesticks and you had MACD to model the EQUIVALENT of price? im just being philosophical. Price is a value...just like a house price. But is it open, hi low close? Do you realise that the Open is just the price when time transitions from one discrete time value to the next? If price goes up and down 20 times in 60 seconds, would you see that on a 1M chart?...
Nice post Vlady. Tick chart is good ...
  • #5,763
  • Aug 16, 2014 12:41am Aug 16, 2014 12:41am
Hei EURUSDD

thanks for the lesson.

those maths looks alien to me, last saw them about 20+ years ago.

will investigate further into your pictures.

many thanks
  • #5,764
  • Aug 16, 2014 2:30am Aug 16, 2014 2:30am
  •  Neio
  • Joined Oct 2012 | Status: Can't think outside?Enlarge the box | 688 Posts
Quoting Eurusdd
Now if you get the h right for a given time frame and at the current price p, the previous bars never hit p, then probability is on your side for a hit within the next h bars because the probability that p is h-transient is very low. If your h is right, this probability should be about 3%. That is 97% of the time, at least one of the next h bars should hit p. This works in theory and in practice for any stochastic process similar to the ones that govern currency prices!!! Very important: If your h is correct, then the height of your rectangle should...

Many thanks Eurusdd!!

I believe we can reverse engineer to find the h values. If we take a chart that has a 100 bars we should only find approximately 3 (3%) of the bars are h-transient (i.e they have prices that have not been returned to within a certain number of bars).

We look for those rare cases then count the number of bars when those prices were previously reached. The lowest of those should be the h-value.
Then backtest this number across the same time frame. We do this exercise for each time frame that we want to trade.

Regards

Neio
An expert is a man who has made all the mistakes which can be made
  • #5,765
  • Aug 16, 2014 2:56am Aug 16, 2014 2:56am
Quoting Neio
{quote} Many thanks Eurusdd!! I believe we can reverse engineer to find the h values. If we take a chart that has a 100 bars we should only find approximately 3 (3%) of the bars are h-transient (i.e they have prices that have not been returned to within a certain number of bars). We look for those rare cases then count the number of bars when those prices were previously reached. The lowest of those should be the h-value. Then backtest this number across the same time frame. We do this exercise for each time frame that we want to trade. Regards...
Good idea .... thanks Neio ....
Similarity can change your life !
  • #5,766
  • Edited 4:08am Aug 16, 2014 3:27am | Edited 4:08am
Quoting LiquidGenius
{quote} Ok you're right. Now it's really blown. {image}
http://www.forexfactory.com/attachment.php?attachmentid=1490943&stc=1&d=1408156090

Hi LiquidGenius, may i know what is the difference between box and rec?

Am i understanding it incorrectly? The low probability (0.000%) is for having consecutive candles that carries a h-transient price?

[edit: anyone having same problem as me? coz the way i see it, having 2 consecutive bars with transient price is quite common.]
  • #5,767
  • Aug 16, 2014 4:19am Aug 16, 2014 4:19am
Quoting vector0
{quote} http://www.forexfactory.com/attachment.php?attachmentid=1490943&stc=1&d=1408156090 Hi LiquidGenius, may i know what is the difference between box and rec? Am i understanding it incorrectly? The low probability (0.000%) is for having consecutive candles that carries a h-transient price?
Sorry. To clarify, there are 2 possibilities for any bar. Either the bar is a "box" bar, or a "reg" bar. "Reg" is short for "regular", whereas a box bar is a bar that has a complete box set up. A reg bar is basically any bar that is not a box bar. Just to show frequencies, there are 238 box bars in the set, and 3642 regular bars. Therefore the occurrence of a box bar is 6.5%. The top box is my confirmation of what eurusdd suggested; or at least, what I got out of what he said. Now that I go back and he has not explicitly talked about the part that I plan to test in the coming days/weeks; I will not say it, because he has mentioned not spilling the whole can of beans before. (:
I will say that knowledge of this certainly explains why he makes calls the way he does. At least part of it.
Attached Image (click to enlarge)
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"Mrrraggglhlhghghlgh"
  • #5,768
  • Edited 4:55am Aug 16, 2014 4:30am | Edited 4:55am
Quoting LiquidGenius
{quote} Sorry. To clarify, there are 2 possibilities for any bar. Either the bar is a "box" bar, or a "reg" bar. "Reg" is short for "regular", whereas a box bar is a bar that has a complete box set up. A reg bar is basically any bar that is not a box bar. Just to show frequencies, there are 238 box bars in the set, and 3642 regular bars. Therefore the occurrence of a box bar is 6.5%. The top box is my confirmation of what eurusdd suggested; or at least, what I got out of what he said. Now that I go back and he has not explicitly talked about the...
Hi LiquidGenius,
At your last image, do you use "5" as "h" ? The value "5" is a must ( in term of "optimized" ) ?
Thanks

Edit :
Can you explain the Yellow Box i marked ? is it valid ? hm... seeing this result, i remember of optimized ZZ
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  • #5,769
  • Aug 16, 2014 4:36am Aug 16, 2014 4:36am
Quoting Eurusdd
So, we can assume that we are in the world of Markov chains and according to most people, that is a dangerous place to live. But, believe me, when we are done with this study, you will wonder what happened to yu all these years.... Why didn't you see it..?{image} In the world of forex trading, the transition probabilities are used to understand how we move from one price state into another. Remember, I said you don't need to know what process drives the price! There will always be loop-holes. No matter the underlying process.
Interesting series of posts EURUSDD, thanks - it’s given me something to think about and still trying to work through it all and how this can be best converted into working out a probability to be used for making trading decisions, but ....

Why do you refer to a Markovian Process, where the future state of a process (or price) depends only upon the present state and not on any past states?

Would it not more wise or correct, to use an Ohrnstein-Uhlenbeck-Process, which then would be Gaussian, Markovian and stationary?

Especially in your case this question seems relevant because you are looking at the past in order to find the "problems".

So, please, clarify why a Markovian process when you do in fact reference the past?

Regards
*** Shoot for the moon. Even if you miss, you'll land among the stars. ***
  • #5,770
  • Aug 16, 2014 4:45am Aug 16, 2014 4:45am
Quoting Freefox
{quote} Interesting series of posts EURUSDD, thanks - it’s given me something to think about and still trying to work through it all and how this can be best converted into working out a probability to be used for making trading decisions, but .... Why do you refer to a Markovian Process, where the future state of a process (or price) depends only upon the present state and not on any past states? Would it not more wise or correct, to use an Ohrnstein-Uhlenbeck-Process, which then would be Gaussian, Markovian and stationary? Especially in your case...
I think he means the opposit. It's not Markovian.
A pip is only worth it if you know how much you risked to earn it
  • #5,771
  • Aug 16, 2014 5:37am Aug 16, 2014 5:37am
Quoting vlady1974
{quote} I think he means the opposit. It's not Markovian.
No, read through it all again vlady ... he's pretty clear in a few places about each bar been Markovian and he wants us to think along those lines in our analysis.

Just one example here...

Quoting Eurusdd
... In fact, we shall assume that any two bars on your chart are independent, that is the process has no memory. Even in this case, you can still beat the process..
*** Shoot for the moon. Even if you miss, you'll land among the stars. ***
  • #5,772
  • Aug 16, 2014 5:49am Aug 16, 2014 5:49am
Quoting vector0
{quote} ... anyone having same problem as me? coz the way i see it, having 2 consecutive bars with transient price is quite common.
He clearly said that 2 consecutive bars with h-transient prices are extremely uncommon, if you get the value of h right. It's all about choosing the right h value for the given timeframe.
You reap what you sow.
  • #5,773
  • Aug 16, 2014 6:04am Aug 16, 2014 6:04am
Hi Eurusdd,

Thank you very much for taking the time to explain the stochastic process of price movements. I do have a couple of questions though, for you or anyone else who understands it (Vlady?):

1) I understand what the h constant is but I'm less sure about the value of k. Is this a constant too? I thought it might be the height of the rectangle (i.e. price range), but that would make it dependant on h. You said that setting the right values for k and h was very important for this to work, buy I don't even know what k is!

2) I'm sure you're going to get to this, but how do these rectangles relate to dissimilarity? Does a dissimilarity occur when a h-transient rectangle is forming? Since you say that the price must return there, it can't ultimately be h-transient! Or does it occur when a h-recurrent rectangle that looks like a h-transient one is forming (i.e. full rectangle to the left of suspect price and partial rectangle to the right)?

Thanks!
You reap what you sow.
  • #5,774
  • Aug 16, 2014 6:24am Aug 16, 2014 6:24am
h = bars ? But what is k ?

very interesting but i am not good in english And maths.... Hard work

eurusd, maybe if you try constant bars, your results could be better (if They CAN be )

good trades to all
Bottomless wonders spring from simple rules, which are repeated without end
  • #5,775
  • Aug 16, 2014 7:14am Aug 16, 2014 7:14am
Attached Image (click to enlarge)
Click to Enlarge Name: Capture.PNG Size: 41 KB


Let me explain one way you can trade this fact. I borrowed this picture from a post above. Now at the current development, he placed a ? mark at the red spot because we do not know if the zone developing will be transient yet. But this is where you can beat the market. Let us suppose that A will be a transient zone, then we can expect that the region just above A must be recurrent. Therefore, once price gets into that region, we are in for $$.

So, all you have to do is estimate a constant value for k or let is depend on the current bar. However, in general K should be small!!
  • #5,776
  • Aug 16, 2014 7:17am Aug 16, 2014 7:17am
Guys,

Keep thinking! Write out the formulas and google terms. I don't have it yet, but take the lead off LiquidGenius.
If you don't know something, u have to learn it and study it. So this morning, I've started learning how to program MT4.

Sorry... No quick answers here. Philosophy breeds ideas and discussion. Answers are verifiable facts from observation... So we must learn to observe for ourselves after ideas like this have been presented.

FreeFox, my mathematics is poor...so I rely heavily on linguistic logic. My interpretation is that even if we assume Markovian states we don't need to understand their process. Thus by Proposition 1, we have already broken the assumption when referring to h and X as a function of time t and Timeframe T. Thus, the market is not random therefore not Markovian...... Is that logical?
A pip is only worth it if you know how much you risked to earn it
  • #5,777
  • Aug 16, 2014 7:22am Aug 16, 2014 7:22am
Quoting Eurusdd
{image} Let me explain one way you can trade this fact. I borrowed this picture from a post above. Now at the current development, he placed a ? mark at the red spot because we do not know if the zone developing will be transient yet. But this is where you can beat the market. Let us suppose that A will be a transient zone, then we can expect that the region just above A must be recurrent. Therefore, once price gets into that region, we are in for $$. So, all you have to do is estimate a constant value for k or let is depend on the current bar....
This is what I was thinking!

Sorry guys, I may be starting to understand this and unfortunately, I won't be making this public.
A pip is only worth it if you know how much you risked to earn it
  • #5,778
  • Aug 16, 2014 7:29am Aug 16, 2014 7:29am
Graph looks like zigzag? Does k = pips?
Bottomless wonders spring from simple rules, which are repeated without end
  • #5,779
  • Aug 16, 2014 7:39am Aug 16, 2014 7:39am
Quoting limprobable
Graph looks like zigzag? Does k = pips?
Looks like ZigZag, Smells like ZigZag, Sounds like ZigZag....

but isn't ZigZag
A pip is only worth it if you know how much you risked to earn it
  • #5,780
  • Aug 16, 2014 7:58am Aug 16, 2014 7:58am
Quoting vlady1974
Guys, Keep thinking! Write out the formulas and google terms. I don't have it yet, but take the lead off LiquidGenius. If you don't know something, u have to learn it and study it. So this morning, I've started learning how to program MT4. Sorry... No quick answers here. Philosophy breeds ideas and discussion. Answers are verifiable facts from observation... So we must learn to observe for ourselves after ideas like this have been presented. FreeFox, my mathematics is poor...so I rely heavily on linguistic logic. My interpretation is that even if...
hey buddy, what resources are you using to learn mt4 programming?
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