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Transient Zones - Basics

  • #41
  • Edited 4:07pm Oct 20, 2014 3:33pm | Edited 4:07pm
Samples

h=8
Timeframe=4H

This means 32 hour timespan for a zone to complete. There are 3 zones on this level of zoom.

Attached Image (click to enlarge)
Click to Enlarge Name: Transient Zone - 1.png Size: 69 KB


If we zoom out, we get this: 14 visible zones. Do you notice anything about these zones? Most of the zones appear at the end of a move.

Attached Image (click to enlarge)
Click to Enlarge Name: Transient Zone - 2.png Size: 63 KB


What if we decrease h to 6?
h=6, timeframe stays the same.

Attached Image (click to enlarge)
Click to Enlarge Name: Transient Zone - 3.png Size: 64 KB


h=12, timeframe stays the same.

Attached Image (click to enlarge)
Click to Enlarge Name: Transient Zone - 4.png Size: 62 KB


Let's summarise the obvious:

  1. transient zones can be one of 2 types: (a) End of Bar (b) Middle of Bar
  2. the number of TZs increase when we lower the value of h
  3. the number of TZs decrease when we increase the value of h
  4. the value of h is like a net that catches an appropriate amount of time for which to find extreme moves of price.

A pip is only worth it if you know how much you risked to earn it
  • #42
  • Oct 20, 2014 4:57pm Oct 20, 2014 4:57pm
H and Probability
Okay, now is the time to get down to brass taxes. Let's go to the "Jewels of the TZ Section" document:

"There is a minimum value for h for which 97% of prices h-recurrent"
"The beauty of this is summed up in one powerful statement - Price is 97% recurrent, 3% transient"

I believe this is one conceptual hurdle that people have had trouble with in terms of applying TZs to a trading opportunity.
It's because h is like a garment or clothing size. If I'm Large, then the measurements won't be the same as a Medium... but the item of clothing should still behave the same way for that person.

So. The minimum value is up to you.
It's the value that allows you to read the charts and say.... hey, there's a TZ and price will have a % chance of returning to it or avoiding it.

But how do we actually compile this statistical probability? This is where another indicator written by Kprsa helps by calculating the probabilities.
This is done by counting the number of bars that are transient over the number bars that have been identified as having a price problem zone.


Kprsa defined the following on his indicator. Here he is responding to Eurusdd:
I separate the stats for potential transient (for example when the candle closes above the maximum of previous h_left bars) and potential fractal (candle closes below the max of previous h_left bars, even though the high of this bar was higher than the max of previous h_left bars) zones. Both together add up to possible problem bars. Total stats are also calculated.

The resolving of the problem bar means that the potential transient/fractal zone was historically cleared within the next h_right bars (So this implies the zone width k=0). This strong condition is in principle not necessary for trading, one can use your recipe and win pips even if the transient zone is not cleared completely in the future (i.e. if k>0).

The indicator gives the probability of success for this case, as one can take profit for k=<k>, k=2<k>, k=3<k> (here <k> is the historical mean value of zone width k, one also needs to take into account one's spread/commission here, the indicator does not do this automatically). Also please note that my notation is slightly different than yours, what you call price+/-k in the Proposition 1, I call price +/- k/2 (i.e. my zone width is k, not 2k).


This means that when using this indicator, you will need to change or adjust to Kprsa's terminology. For example:

  1. k is defined as a mean value of price, where k > 0
  2. the resolving of a potential zone was cleared within the next h bars to the right.
  3. transient bar is a bar with the zone in the bar
  4. fractal bar is a bar with the zone located at the end

Here is the indicator, Version 3.

Attached File(s)
File Type: mq4 RecurrenceStatisticV3.mq4   14 KB | 2,046 downloads
File Type: ex4 RecurrenceStatisticV3.ex4   24 KB | 1,589 downloads
A pip is only worth it if you know how much you risked to earn it
  • #43
  • Oct 20, 2014 5:19pm Oct 20, 2014 5:19pm
H and Probability - Part 2
"The beauty of this is summed up in one powerful statement - Price is 97% recurrent, 3% transient"

When we set h, we are looking for zones within a small timeframe that will, for the short term, be price repellent or transient.
Many will treat this type of reaction much the same way as Support and Resistance. This can be fine to do.

However, to do so will mean that you are not fully taking advantage of the original propositions and the clue that Eurusdd has provided us.

If our timeframe is 1 hour and we set h=8 and discover prices are transient from 100 to 120, then it stands a chance that after 8 hours of time price will eventually return and cross the range 100-120 to clear the range and make that range recurrent.
A pip is only worth it if you know how much you risked to earn it
  • #44
  • Oct 20, 2014 5:27pm Oct 20, 2014 5:27pm
Quoting vlady1974
H and Probability - Part 2 "The beauty of this is summed up in one powerful statement - Price is 97% recurrent, 3% transient" When we set h, we are looking for zones within a small timeframe that will, for the short term, be price repellent or transient. Many will treat this type of reaction much the same way as Support and Resistance. This can be fine to do. However, to do so will mean that you are not fully taking advantage of the original propositions and the clue that Eurusdd has provided us. If our timeframe is...
Yes, that is the hard-truth.
Can you imagine what will happen if price is 3% recurrent and 97% recurrent.
It is the recurrent nature of price that makes the market unpredictable. Yet is is the same property that is the secret to success.
  • #45
  • Edited 5:40pm Oct 20, 2014 5:30pm | Edited 5:40pm
Uneven Transient Zones
Using FreeFox's Indicator, there is a setting called "Combine Zones" which you can set to False.

Attached Image


This has the following effect:

Attached Image (click to enlarge)
Click to Enlarge Name: Transient Zone - 5.png Size: 82 KB


What is evident is that Uneven Zones tend to appear at the end of a move. The interesting thing is that you will be able to spot an Uneven Zone forming as price action develops. Uneven Transient Zones (UTZ) require at least 2 price bars. These bars are effectively failed retracements that then turn into reversals.

What Is It?
The Anchor Bar or Focus Bar is in the centre. You take the entire height of this candle as the total height of the box. You then count h number of bars to the left and you reduce the total height by the box by the area of any of the bar/bars within h bars left. Repeat this for the right side. The reason it is uneven is because one side will have less bars that create recurrence than the other side.
A pip is only worth it if you know how much you risked to earn it
  • #46
  • Oct 20, 2014 6:10pm Oct 20, 2014 6:10pm
Quoting Eurusdd
{quote} Yes, that is the hard-truth. Can you imagine what will happen if price is 3% recurrent and 97% recurrent. It is the recurrent nature of price that makes the market unpredictable. Yet is is the same property that is the secret to success.
This further confirms a certain trading philosophy I recently embraced.
"The market (& traders) greatest strengths is also their greatest weaknesses"
  • #47
  • Edited Oct 21, 2014 1:56am Oct 20, 2014 7:12pm | Edited Oct 21, 2014 1:56am
Quoting vlady1974
WHAT IT IS The purpose of this thread is to act as a journal of my views on the concept of Transient Zones. The underlying purpose is to simplify the concepts for newcomers or beginners. WHAT IT IS NOT It is not meant to become a classroom, but it is meant to be informative. It is not guaranteed that I will reply to people's comments. It is not an interactive journal or a trading journal. It is not a complete exploration of "The Similarity System" concepts. It is only ONE of at least 3 that have been discussed. This thread does not make any claims...
Good work Vlady. Subscribe Will try my best to understand your great posts.

Edit:
Quoting vlady1974
#4 Multiple Timeframes Seasoned traders know this rule: Higher Timeframes are more powerful than Lower Timeframes. xxxxxxxxxxxxx Always check from Monthly to Weekly to Daily to Hourly (4H to 1H) to Minutes (30M to 15M to 5M). xxxxxxss.
Hi Vlad, so we do not need to check for TF M1 ? Eurusdd at other thread said that we need to do cross TF : M1-MN1 & cross brokers.
Please correct me if i am wrong.

Thanks
  • #48
  • Oct 21, 2014 1:33am Oct 21, 2014 1:33am
Quoting vlady1974
Uneven Transient Zones Using FreeFox's Indicator, there is a setting called "Combine Zones" which you can set to False. {image} This has the following effect: {image} What is evident is that Uneven Zones tend to appear at the end of a move. The interesting thing is that you will be able to spot an Uneven Zone forming as price action develops. Uneven Transient Zones (UTZ) require at least 2 price bars. These bars are effectively failed retracements that then turn into reversals. What Is It? The Anchor Bar or Focus Bar is in the centre. You take the...
Subscribed? School time
  • #49
  • Oct 21, 2014 1:41am Oct 21, 2014 1:41am
Quoting smallcat
{quote} Good work Vlady. Subscribe Will try my best to understand your great posts. Edit: {quote} Hi Vlad, so we do not need to check for TF M1 ? Eurusdd at other thread said that we need to do cross TF : M1-MN1 & cross brokers. Please correct me if i am wrong mate. Thanks
Look for signals on higher timeframe, then swithc to lower time frame for entry trigerrs. Doing your analyses on higher timeframes help you have an understanding of what happeneing in the market such that you dont have a blind spot.
  • #50
  • Oct 21, 2014 1:45am Oct 21, 2014 1:45am
Quoting ephisi
{quote} Look for signals on higher timeframe, then swithc to lower time frame for entry trigerrs. Doing your analyses on higher timeframes help you have an understanding of what happeneing in the market such that you dont have a blind spot.
Got it, thanks mate
  • #51
  • Oct 21, 2014 3:27am Oct 21, 2014 3:27am
Great work Vlady & thanks for mentioning me as an example in some of your posts I don't deserve that mate
I can't see the idea getting any clearer than you are portraying it.

Best,
Jay
  • #52
  • Oct 21, 2014 3:33am Oct 21, 2014 3:33am
Quoting FX-Jay
Great work Vlady & thanks for mentioning me as an example in some of your posts I don't deserve that mate I can't see the idea getting any clearer than you are portraying it. Best, Jay
Jay, you're a great inspiration and a sobering reminder to us all of the power in keeping it simple.
For that, you deserve all that you earn!



Best of Luck with the 100 Club!
A pip is only worth it if you know how much you risked to earn it
  • #53
  • Oct 21, 2014 3:51am Oct 21, 2014 3:51am
Great idea for a thread vlad - I've subscribed

I may have created the "Transient Zones" indicator but I've not managed to have a eureka moment yet and work out how to gain an advantage using it in trading.

Attached is the indicator again for convenience and saves people searching around for it.

Plus here is the original post I made where I talk about some of the features of it and usage, etc.

http://www.forexfactory.com/showthre...19#post7686119

Looking forward to this thread has I've found it very difficult with existing work commitments keep up with all the many posts in the original thread!

Good luck to all.
Attached File(s)
File Type: ex4 Transient_Zones.ex4   24 KB | 1,928 downloads
*** Shoot for the moon. Even if you miss, you'll land among the stars. ***
  • #54
  • Oct 21, 2014 3:53am Oct 21, 2014 3:53am
Quoting smallcat
{quote} Good work Vlady. Subscribe Will try my best to understand your great posts. Edit: {quote} Hi Vlad, so we do not need to check for TF M1 ? Eurusdd at other thread said that we need to do cross TF : M1-MN1 & cross brokers. Please correct me if i am wrong. Thanks
Hey Smallcat!

Ephisi is right, it doesn't matter which time frames you choose. As long as you check higher time frames as well.
There is a tip here in how I used to trade it in earlier times. Not to say it's no longer valid but I call it a scalping method now and my objectives are longer term.

Now that we all understand what an Uneven TZ is (basically a split Left and Right region), then common sense will tell us that the Left Side represents the PAST within h bars. We can set this within either FreeFox's indicator or Kprsa's indicator (Kprsa's allows you to independently set Left and Right h values).

Here's how I used to trade it. As soon as the LEFT side was completed in terms of h, I would count or wait for the Right side to form a second bar or spike into the Transient Box. This could happen within h=1 to h=5 bars to the right. Once it reduced the Focus Bar's total region, the height of the zone is now lower on the right side and this was my signal that a direction change is happening. I would then look for a Price Action setup to trigger an entry.... I have several of those and are nothing to do with TZ. For example, there is a method called Push/Pull which is just an entry on a pull-back. I have another one called Hitch which is a breakout over 3 candles/bars.

Now here's the beauty of it... If I have a signal on the 1H and my h value = 10 for example. That means I have 10 hours of PAST history that has formed a zone but the right hand side of the focus bar is only 1 or 2 candles on the right... that means there is a right zone formed on 2 hours recently. If I switch to a 5M with the same h=10 setting... I am effectively saying, give me TZs over a 50 minute timeframe (which is almost equivalent to 1 hour) so if there are TZ setups there that give me a signal that a TZ Bottom occurred on the 5M and the 1H forming TZ is on a bottom area of a chart, then I have a stronger clue that it's a long. I would then look for supporting evidence on the 15M. If that also has a TZ on the bottom that is another reason to be Long.

Basically, I find corroborating evidence on the lower timeframes that would support an EARLY directional move given that the higher timeframe (eg. 1H in this case) is slower than the minutes. Hence my trades were scalps because they must still adhere to the 5M timeframe chart patterns and not the 1H.... unless the 1H is supporting a 4H or 24H or 48H or etc etc etc.

You can mix this up any way you like. 1H to 1M. You could set 1H to 8 for a complete day's TZ and set the 1M to 30 or 15 to give you 15 minute blocks of the 1H. If you set it to 60 you would get lesser setups (I've mentioned this in the posts above) but it should sync with the 1H.

Again... I'll repeat this for the others because it bears repeating....

  1. Set your Objectives (short term vs long term)
  2. Set your Timeframe preferences and align with Lifestyle/Workstyle
  3. Check Higher Timeframes to LowerTimeframes with the awareness to make Lower timeframes equivalent to Higher timeframes.
  4. Check for Reasons to Trade
  5. More importantly, Check for Reasons Not To Trade
  6. Define Your Risk (SL), Define Your Reward (Target)
  7. Go

A pip is only worth it if you know how much you risked to earn it
  • #55
  • Oct 21, 2014 4:00am Oct 21, 2014 4:00am
Quoting Freefox
Great idea for a thread vlad - I've subscribed I may have created the "Transient Zones" indicator but I've not managed to have a eureka moment yet and work out how to gain an advantage using it in trading. Attached is the indicator again for convenience and saves people searching around for it. Plus here is the original post I made where I talk about some of the features of it and usage, etc. http://www.forexfactory.com/showthre...19#post7686119 Looking forward to this thread has I've found it very difficult with...
Glad to see you here FreeFox!
Your indicator has been a very big help! I hear ya about the work commitments and lately, I've not been doing that much work LOL!
A pip is only worth it if you know how much you risked to earn it
  • #56
  • Oct 21, 2014 4:04am Oct 21, 2014 4:04am
The thread is now open to discussion.
A pip is only worth it if you know how much you risked to earn it
  • #57
  • Oct 21, 2014 4:11am Oct 21, 2014 4:11am
1st discussion point today:

I put the poll up on the first day/first page to gauge whether readers were beginners or not and now there are 34 intermediates vs 24 beginners. Wow!

My original intention was to help the beginners but if people want to talk advanced stuff, I am happy to.
Just a caveat about "advanced" - I am just as much a beginner as the next "advanced" trader. There are a few now that have their own style and method which works.
I don't want to be labelled an "expert" on advanced stuff because frankly I know alot of you privately are doing bloody brilliantly! LOL

We can discuss different concepts but it is inevitable that one concept may contradict another and it doesn't have to be a right/wrong distinction...just different.
Can we therefore avoid the usual thing that happens in threads where we get heated due to our passionate devotion to this stuff.

I'm happy to discuss advanced concepts but my original preference is to put those topics back in the Similarity Thread where it ought to stay and be pioneering.
A pip is only worth it if you know how much you risked to earn it
  • #58
  • Oct 21, 2014 4:32am Oct 21, 2014 4:32am
Quoting vlady1974
The reason it is uneven is because one side will have less bars that create recurrence than the other side.
I think you meant that a TZ is uneven when the price on one side hasn't come back the same amount as the other side. The more bars you take into account at the right side the more likely price has a chance to come back to the Anchor Bar but one bar on the right side could be enough to form a UTZ.
  • #59
  • Oct 21, 2014 4:39am Oct 21, 2014 4:39am
Uneven area is the key. Vlady, it makes sense what you said.
  • #60
  • Oct 21, 2014 4:41am Oct 21, 2014 4:41am
Quoting hilavoku
{quote} I think you meant that a TZ is uneven when the price on one side hasn't come back the same amount as the other side. The more bars you take into account at the right side the more likely price has a chance to come back to the Anchor Bar but one bar on the right side could be enough to form a UTZ.
Perhaps I didn't explain well it enough.
But part of what you're saying is right.

If I use Kprsa's indicator, 2 bars with arrows pointing in the same direction are an instant visual cue. This is because one of those will be the Anchor Bar. The other will be less than the Anchor Bar (left or right). If I use FreeFox, then it's 2 boxes with different height. If I overlay them together.... they are almost always the same. So two different implementations producing same result = good.

In terms of "when price on one side hasn't come back the same amount as the other side".... yes, let's rephrase.
The anchor bar is the extreme price bar. It will be the High or Low of a swing. Price retracement on either side will usually not be equal. One will be deeper than the other. In essence, a UTZ is a failed retracement indicating a change in direction.

My personal favourite setup is that the Anchor Bar is a long bar with the Left Side usually pretty clear and open, the Right Side has candles within the body of the Anchor Bar but have not taken out the High or the Low of the anchor bar.
A pip is only worth it if you know how much you risked to earn it
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