Transient Zones Strategy - Hacking Forex Source Code
Forget everything you knew about the market. Try when you get acquainted with the material below, turn off internal filters and look at the market from a new perspective. Charts are not what they seem.
Hello dear forex traders! Today we’ll talk about one very original and deserving of comprehensive acquaintance trading system. She called Transient zones or “Transitional zones”. It is based on an extremely powerful idea, having understood which, you will forever change your views on trade. And although detailed rules for entry are given below, the main thing is to understand the idea, only then you can move on.
Characteristics Transient Zones
Platform: Metatrader 4
Currency pairs: any
Timeframe: M1 - D1
Trading time: around the clock
Recommended DC: Alpari, Roboforex
Theory at the core of the system
Transitional and repeating zones
The transient zone is a zone to which the price movement determined by the variable h (the number of candles before and after the focus bar) will not return.
A recurrent zone is a zone to which price movement will return (THEY ARE NOT TRANSITIONAL).
Let's simplify this.
- In the original definitions of the author of the TS it is said that the transitional and repeated prices should be within the maximum and minimum price bar.
- Therefore, we must somehow separate, or filter out, transition prices from repeated prices.
- One useful way is to look at the left and right near the bar.
- We look at the bar on the left: does it cross the High / Low level of the current bar.
- We also look at the bar on the right: does it cross the High / Low level of the current bar.
- The intersected area is called repeating. The rest of the area is called transitional.
- How many bars on the left and right should you look for? Their number is equal to the value of h.
In the presented figure (below) we have a central focus bar (in the green rectangle). It is necessary to determine the transition and repeating zones.
Using the above rules, you can see that to the right of the bar (h = 1) we see a bar that is within the maximum / minimum of the central bar.
The rest of the area, which was not involved, may initially be considered transitional.
Obviously, it will be easier if you use the Transient Zones indicator. The figure shows the construction of the zone.
Take the height of the central bar and subtract from it any bar from among the h bars that have broken the High / Low levels of the central bar.
The remaining area is transitional.
Also pay attention to the tail of the candle. This also suggests that in this bar the price went lower, then higher and closed with a rise, indicating that the price did not stay below. Therefore, lower prices from this bar were transitional. However, for one bar you can’t say what specific prices were transitional or recurring - to answer this question you will need to switch to a lower timeframe.
The figure shows that only 4 bars to the left of the central bar broke through its maximum / minimum levels. On the right was 3 bars, breaking through its high / low.
Thus, we could summarize that we have a transition zone consisting of more than 4 repeating prices, where 4 is the maximum number of bars that have broken its maximum / minimum level.
And what from this?
The previous discussion showed how the transition zone is determined on the price bar. If you define a transition zone, then you also define a repeating zone.
If you use the Transient_Zones indicator, then everything is pretty simple. A repeating zone is any zone outside the rectangle.
Let's make it even simpler. If you use an indicator Transient_Zones, then the rectangles border the transition zones.
Why is this so important?
A trading opportunity is an area we have designated, AT WHICH THE PRICE IS PROBABLY NOT GOING TO RETURN within h bars.
If this is likely, then we can open a position in one of two directions:
- Trade away from the transition zone
- Trade in the direction back to the transition zone AFTER the chart displays h bars
In other words, we are betting that the price will not return to the transition zone. If we believe that the price will not return to the transition zone, then we, therefore, make an assumption about the direction of the price movement. “Transitional” means that there will be no “return of price”, and we should definitely move in the direction from this zone.
Since the initial definition of Eurusdd (Method Author) is that a transition zone exists for a given value of h, then we say that there is a time limit for the transition zone. Similar to how the clock is ticking, the price will not return to this zone within a certain time interval. If, for example, you determine that h is 5, then you expect that the price will not return within the rectangle for at least 5 price bars. If you work on an hourly schedule, this will mean that there will be no price return within 5 hours. What could you do with such information? Think about it.
Experienced traders know this rule: higher timeframes are more powerful than shorter, lower timeframes.
Let's move away from this topic of discussion. It is well known that trends that exist on longer timeframes will always be stronger and will break (cancel) trends on shorter timeframes.
You will not be able to overcome the uptrend on the weekly chart, even if you open short positions several times on the 5-minute chart. There is a high probability that prices will move higher, because there is an uptrend on the weekly chart. Similarly for a downtrend.
This opens up a topic that can become quite complex due to the nature of the time / price. This is not “time or price”, but a combination of price and time.
I say this because if I say that the EURUSD currency pair bottomed out at 1.2495 on the weekly chart, I must also indicate the time, since the exact coordinate on the chart is (x, y), where x = price, and y = time. You cannot mention one without the other. The same is true for the 15-minute chart: if I just say the price is 1.2495, then I probably should tell you the date and time that this price reached.
This is because time / price is by its nature a fractal. This means that it can be divided into smaller parts, and these parts form the equivalent values of the large parts.
For example, 1 hour equals four 15-minute segments, which is logical. For charts, this will mean that 1 hour bar will represent 4 price 15 minute bars.
This makes it possible and challenging to the extent that technical graphs are associated with transition zones and with the value of h.
Since h is the time, h represents the number of bars on the chart. But if you want to analyze where prices are transitional, you will need to decide on which timeframe we will determine them.
When performing routine tamfrack analysis, I highly recommend that you define transition zones on all timeframes.
Check transition zones on all time frames always in the following order. Start with a monthly timeframe and then in descending order: on the weekly, daily, 4-hour, hourly, 30-minute, 15-minute and 5-minute.
“Day” is, in my opinion, the purest form of a temporary fractal, because 1 day can be defined as 24 hours. There are no other adjustments to this definition. Based on this definition, you can divide the largest value of the “day” as 24 hours and then divide the time interval into hours and minutes (1 hour is 60 minutes).
Thus, theoretically we can say the following:
1 day = 24 hours
1 day = 1440 minutes
This means that on any minute chart, you can use 1440 candles as a parameter equivalent to 1 candle on the daily chart.
Using simple mathematical operations, you can easily imagine other graphs: hour, minute, etc.
If we needed to switch from a smaller to a higher timeframe, then the week should be defined as 5 days .... And speaking of the monthly chart, it does not necessarily contain 4 weeks, here you need to look at the calendar months. Months contain 30-31 days, and there are holidays.
Thus, any timeframe longer than the daytime is more difficult to determine in fractals.
So why is it so important to consider all time frames?
In light of the above, the key effect of checking different time frames is that the value of H most likely has different results for analysis.
What should be the value of H?
A frequently asked question is: “What should be the value of H?”
Answer: “It depends on ...”
It depends on your trading goals.
It depends on your trading style.
The scalper is likely to select a smaller value with h.
A position trader or swing trader is likely to opt for a larger h value.
Or something in between.
How h acts as a filter of the original thesis: prices will not return to a certain level within a given period of time.
Therefore, using the h variable, you need to consider the timeframe you are working on, as well as any equivalent timeframes that your strategy relies on.
For example, traders usually prefer to look at 15M and 1H charts.
Therefore, it would make sense to use the H value on the 15M chart, in the equivalent of 1 hour.
But what if you really work on a 4-hour chart and want to use the hourly chart? On the hourly chart, the value of h should be 4. On the 15M chart, the same value should be 16.
Experiment with this and look at the results. The idea is for you to begin to feel what the price is doing after the transition zones appear.
Firstly: Exact entry and exit algorithms you need to determine yourself! Depending on your trading tactics and trading style.
Secondly: It is impossible to enter “from the bulldozer” only because a transition zone has begun to form!
So, the technique described above can serve as one of the filters for your trading system, or the basis for creating a new one. It is unreasonable to use the indicator for thoughtless entries along the arrows. The author of the strategy itself does not give specific parameters for entry / exit / stop loss / take profit. Therefore, I will not. You will have to turn on your head.
Possible strategies for working with Transient zones:
- Enter when forming Price Action setups near transition zones
- Combine with VSA Methodology
- Enter the breakdown of the transition zone to roll back to it, or along the trend (depends on your goals)
- Place pending orders above and below the transition zone
- Search for places where the transition zone coincides with support / resistance levels and trade them
- Trade back to the transition zone using it as a target
- Combination with another strategy of your choice, or with individual indicators
- Your option
I also propose to pay attention to a competent interpretation of the method from our forum member Mamotaro:
Forex strategy Transient zones undoubtedly represents an interesting object for study and experimentation. The main thing is to understand the idea underlying it. And then try to combine it with your own views on the market and trading tactics. The results can exceed all your expectations.
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