Eurusdd added supposedly later on a formal description of the similarity idea to the 1st post in the similarity thread:
This doesn't seem to be something special. It states that there are two stochastic processes that should be isomorphic (bijective?) most of the time. This imo could be either
- the price itself and an indicator that resembles the prices, or
- two indicators that show similar readings most of the time.
The Greek letter λ can then be interpreted as a parameter (i.e. indicator setting) that determines the relative frequency of similarity. Following Eurusdd's statements, λ should be chosen in a way that the two processes are similar most of the time (almost surely), i.e. > 90 % similarity (e.g. P = 0.97).
I interpret it this way: If two processes are hardly dissimilar then one could assume that a similar state follows a dissimilar state most of the time. Thus, the stochastic processes are somewhat predictable (at least if further properties are true, e.g. that a trend will most likely continue instead of reverse).