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Hi All,
For some reason I am much more comfortable putting out ideas here than at FF.Readers of the Similarity thread will recall that it started by asking us to observe that certain things were normal more than 90% of the time. And when they diverge we have a trade plan to develop based on what it would take to get things “back to normal”.
I am suggesting that anyone that sees something of that nature please post it here. Many of us know that things like Bollinger bands are based on having 95% of prices inside the bands, but i am also talking about things not so obvious, like EURUSDD’s cycle indicator on 2 different time frames.Here is my pet project: I have put three standard MT4 simple moving avgs on a weekly chart. all 3 bar avg. 1st is price typical, 2nd is high 3rd is low.
As you can see more than 90 % of bars cross at least 2 of the moving averages. When it gets in a strong trend it will shift to beside the center line, but there is still a pattern there that lends itself to probabilistic analysis. If you open the week right on the center line you can have a good idea where prices should go to that week. It works on other time frames too.
Hi KENERGY,
I borrow your image and draw what i understand you.
Is it correct?
Nice new thread kenergy, your idea Looks very interesting. I too am a bit confused on exactly what we are looking for in terms of entry method/setup. Also is your statement that 90% of the bars cross two moving average based on visual testing or were you able to get this number from an indicator that calculated the history?
-Life’s Good & Why Wouldn’t It Be? I’m a Pirate After All!
Piratepip, it is visual at this point. When I started to code things i found that the MA doesnt finalize until the bar is closed so you get strange results like price is at mid line during bar but then mid line is somewhere else at close. This is just a very preliminary idea but if you see a bar that is far from the midline chances are it will go close to it by the end of the bar. It is a regression to the mean strategy, I have just added the MA3 high and MA3 low to get another couple of data points to compare prices to adn thats when I noticed that 90 plus percent of the time prices hit center and one of the other lines.
Marked up some charts at home but my connection went down! Will try to find time to redo at work today.
You can do something similar with the Bollinger bands as well. With bollinger we have the moving average and then the standard deviation. If the standard deviation is set correct, then whenever price touches upper or lower band, we have a rare event that might happen only 1% of the time. Look up on standard deviation if you aren’t familiar with it.
http://en.wikipedia.org/wiki/Standard_deviation
Minimum population Number of standard deviations from mean 50% √2 75% 2 89% 3 94% 4 96% 5 97% 6 
[7]
This is a very good start. I can tell that you are thinking in the right direction
Focus, Patience, Determination & Order in chaos
Refering to your picture and combining the “water flow” theory/model (used in some “recycled bin” thread, somewhere…):
Whenever HIGH channel line change direction from up to down – next bars closes DOWN.
Whenever LOW channel line change direction from down to up – next bars closes UP.
(Only for the first time of change & don’t trade huge bars)
Very, very simple…
G.
Hi Zelo,
Here is my idea of how to use this. Below is Monday night Dec. 8 chart. About 5 minutes before I type this. The top line is at 1.4221, bottom is at 1.395. Last week a rare event happened, neither line got hit. It has been a year since that happened 2 weeks in a row, so we look at other indicators, s/r TZ etc to decide if we think Buy and price will get to top line OR sell and price will get to bottom line. From H4 chart, I am thinking buy, but I have been wrong before.
Saver0, so on the BB parameters in MT4 does picking deviations 2 mean that it will adjust until 75% of bars are within the bands?
Ken
Remember, the Brainstorm part of the title means that any thing you see that is “rare” you can note here, even if you just noticed it and have no ideas of how to trade it. I didn’t really want to make this thread about my observation of the 3 day lines. But they will do until something better comes along.
Saver0, so on the BB parameters in MT4 does picking deviations 2 mean that it will adjust until 75% of bars are within the bands? Ken
So what Standard deviation of 2 means is that 75% of the bars would be within the bands. If you pick standard deviation of 4 example, then about 94% of them should be within the bands. So whenever price crosses above or below the bands, then there is a rare event
Focus, Patience, Determination & Order in chaos
Good thread! One could just trade against the rare event, but there are two general strategies for this kind of “models” to increase success:
1. after a rare event, bet against a rare-rare event happening (2 rare events in row)
2. combine different and/or indipendent statistical events (this is what saver0 is doing with his dashboard I think)
Recurrence as biggest defense and weakness of the market at the same time
<div class=”d4p-bbt-quote-title”>KENERGY wrote:</div>
Saver0, so on the BB parameters in MT4 does picking deviations 2 mean that it will adjust until 75% of bars are within the bands? KenSo what Standard deviation of 2 means is that 75% of the bars would be within the bands. If you pick standard deviation of 4 example, then about 94% of them should be within the bands. So whenever price crosses above or below the bands, then there is a rare event
Ok Saver0, but how do you translate this into a profitable trading system ? It’s simply to open short whenever price break higher BB and open long whenever price break lower BB ? I can code some EA to reproduce this but I don’t think this could lead to profitability in the long run.
What do you think ?
Skyline
Skyline,
I have been trying to combine TZ with BB in trending markets, with a plan to tackle ranging markets next.
For example if the trend is down: When you get PTZ at bottom (new low) on daily chart it has More than the 80% chance recurrence if H is set to 97/3%. So if I get that on a daily I go to the 4 hour and look for a PTZ above the bollinger band to signal sell. Then I have momentum indicator to trigger actual sell. I have found that it has to be ‘tuned’ to the wavelength / amplitude of the market, an I am working on that now. But it is slow going as I work 60HRs a week and post here too.
Jurij,
At this point I am trying to see where I can trade with the 90+ percent. As per the discussion at the start of this thread. If in an up trend the prices hit the top line 90+ percent, and you have an opening below that line, you have a 90+ percent signal any day that happens. So far my EA on that one keeps giving me strange results. Sometimes I think MT4 is screwy but I usually find that is is just my code. Presumably it is just my code even when I cant find it. :)
Ok Saver0, but how do you translate this into a profitable trading system ? It’s simply to open short whenever price break higher BB and open long whenever price break lower BB ? I can code some EA to reproduce this but I don’t think this could lead to profitability in the long run.
What do you think ?
SkylineI’m not sure exactly how to answer your question since I haven’t done this myself. Just observation of how BB’s work and how that can also show rare events based on hard statistics. When a rare event happens, we can take that as either a signal of the trend or a reversal. Would need statistics to back such a claim. How often does the price reverse when price hit BB’s 1/2/3/4/5 standard deviation level(s)? Or how often does it move X pips up or down? These would be interesting questions to answer I would think. Also how about when its left transient H number of bars, what follows? How often does that happen? How reliable is that signal? What can we do to increase the odds in our favor? See how complex of a system is possible with something as simple as BBs? It might even be more profitable than TZ/RZ concept alone even
Focus, Patience, Determination & Order in chaos
Hi everybody!
I’ve got ispired by gg53 post and would like to share my observation.
I’m looking at the direction of MAs:
most of the time MAs are pointing in one direction, but sometimes there are some bars with different direction. They are quite rare. I take them as a signal to have a closer look.
For example, if higher and lower MAs are pointing upward, and mid MA is pointing downward, I assume that during next bar the situation will be “repaired” (mid MA will follow the others MAs and will go up) and this could be achieved if a bar also goes up.
Of course the MAs that I analyse have to be on already closed bars.
Mrs sharker
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