Similarity Thoughts

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Similarity

General idea

Eurusdd added supposedly later on a formal description of the similarity idea to the 1st post in the similarity thread:

Fehler beim Erstellen des Vorschaubildes: Die Miniaturansicht konnte nicht am vorgesehenen Ort gespeichert werden

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).