Tuesday, September 1, 2015

Forex Strategy Transient Zones

Forex Transient Zones strategy is simple bezindikatornoy strategy based on the transition zones, but the indicators are used to ease the probability of counting and search the necessary bars, but more about them below, and based strategy for the return of the price to the same price level, that is, if the price once I visited a numerical value on the graph, sooner or later will come back to him.



Briefly about the transition zones of the theory:

The theory of the transition zones suggests that the price of each will be repeated again and again with probability tending to infinity, but the 85% price again in the next few bars. Another 10-13% probability that the rate persists even after a few bars. As a result, the more the bars right from the price, the greater the likelihood that the price will be repeated.

Transient Zones strategy can be used on any currency pair, then estmultivalyutnaya but prepochtitelna still the currency pair EURUSD, the time interval - M15, you can trade around the clock, and for this to this strategy, you will find forex advisor at the end of the description.
Author advisor recommends using the NDD accounts for trade with Metatrader 4 (they have less spread and more speed execution of transactions), such as Forex4you Cent NDD, Classic NDD >>

Limitations and recommendations on strategy

Avoid trading during important news, including before and after - at the time of sudden price fluctuations.
Here is an example, and thus the algorithm, which is based on the forex strategy Transient Zones:

1) Let's imagine you that we have some bar, which we call - "zoom bar" (bar on which a report will be carried out and that it is interesting for us, in the figure below is marked by an arrow).

2) We know that he, like any other bar or candle on the market have Low (lowest closing price), we assume, for h (conditionally let it be h = 10) bars to the left it is a minimum, ie Low minimum and lower prices there. Thus was formed "Unconfirmed zone" on the chart.

3) When using Recurrent Statistic indicator, we can calculate the probability that the price will return to this at least for the next 10 bars after its formation and hence, if we made a deal, we will be able to close it.

For the M15 range for the EURUSD currency pair, this probability is equal to 77% (based on the calculation of Recurrent Statistic indicator).

That is, with a probability of 77%, we can say that the price in the area still return and our "Unconfirmed zone" will be "recurring area." But, in turn, it is still the probability of 23% percent of the price will not return, and it can become a "transition zone".

4) Now consider the height of our "focal length of the bar." The value in points / pips (as someone comfortable) from the minimum or maximum focal our bar to the nearest minimum / maximum of one of the previous bars, but not more than h bars left on the focal length of the bar, known as the "zone height".

Once again, "height zones" -

High focal distance between the bar, the higher the bar to High, standing up to the focal distance of no more than H (where H = length of the zone). Similarly, for the area, located at the bottom

Of course, judging from the description, all a bit confusing, because better look at the picture, it is indicated by the arrow our 'focus bar. " In this case, the length of the zone h = 30, and the height is just as clear:

So we gave the definition of "transition zone".

If we take the three bars on the left (ie Low - the minimum price of the bar lower than the previous three bars Low), then so we can calculate that in the course of these 7 bars the Low (minimum price) again with a probability of 70%

If you wait 100 bars - the likelihood of recurrence rates will have 92%.

Or in other words, the emerging "unconfirmed zone" on the graph will be repeated with a specified probability of 92%.

Therefore we can say with confidence that if we look at the chart of the currency pair EURUSD M15 minimum or maximum, which is lower / higher than the previous three bars that with a probability of 92% the price again reaches this minimum or maximum within 25 hours .

Having obtained the knowledge and probability, we get a pretty good algorithm or strategy for trade or even create a forex advisor, which tests presented below.

Let's walk through an example of the transaction.

Let us consider an example of the transaction on forex strategy Transient Zones

1) is formed unconfirmed area as an orange rectangle. h = 3 in this case. (Three candles checked Until the focal bar).

2) It is necessary that the height of the zone was not more than five points, but sometimes it may be six or seven. The greater the height of the area - the lower the percentage of winning trades.

3) Put a limit entry order to buy (BuyLimit), at a minimum focal length of the bar (the lower bound of the zone), take profit at the upper boundary of the zone.

4) If within three bars a warrant did not work - delete.

5) Similarly, we enter into transactions to sell. As you can see, the principle of the strategy is quite simple. This is only one interpretation of the possible use of transition zones in practice. Of course you need to consider when trading trends, news spread. All this is taken into account in the EA, which is based on this strategy.