Bill Williams Trading Strategy
Bill .Vilyamsa trading strategy allows absolutely clear, give mathematical precision signals to enter the market, signals an increase in rates, and signals the removal of profits. Moreover, this method allows very clearly foresee the future changes in the market, when most analysts still do not see and can not see them on their monitor screens.
What was once seemed completely unattainable: trading successfully on a regular basis in the Bill Williams’ book presents in a very simple and clear actions, which are also controlled entirely clear criteria and indicators that can not perform except that only does not want to make money on the market .
In order to properly understand the Bill Williams’ Chaos Theory, it is necessary to understand the definition of this concept. Traditionally, chaos is seen as a disordered structure, when in fact its essence more directly opposed to chaos.
Chaos – this is a high degree of order, which organizes and links are unsystematic randomness as opposed to the cause-effect relationships. Chaos is constant, the timing stability. Financial markets – causing chaos.
In the linear world of cause and effect is predictable. The non-linear (real) world of the relationship between cause and effect does not exist. Therefore, from the point of view of B. Williams, the use of fundamental and technical analysis does not allow a regular income in the financial market.
According to chaos theory the investor who is repelled by the linear perspective, will never see "real" market, thus risking permanent loss carry. Chaos theory denies that on which technical analysis is based: market behavior in the future, like the past. Bill Williams believes that the reason why traders lose in the market, is that they rely too much on the different types of analysis, which, he believed, "in reality does not work, and therefore useless, and even dangerous".
In order to achieve excellence in the trade in the financial markets, it is necessary to know the structure of the market itself. This can be achieved by examining the market in five dimensions:
Each dimension adds additional information to the overall picture of the market, so to fully understand it is necessary to "to measure" market in all five dimensions.
It should be noted that, before the execution, and the first signal from the first measurement (fractals) signals of other measurements (AO, AU, zonal and trade Balance Line) are ignored. But after the opening of the first position on the fractal signal trader "adds" this position every time when there is a signal from any of the five dimensions. As a result, when the market moves 30% of traders manage to earn 90-120%.
Sensitive to the price dynamics of the market exit technique allows to lock in profits in the last 10% of the trend, capturing not less than 80% of the traffic (according to B. Williams). Recently, Bill Williams’ approach to trade in the financial markets has become very popular among traders of the FOREX market.
Alligator Bill Williams (Alligator)
Bill Williams Alligator (Alligator) – a combination of three balance lines (Figure 1.)
With Alligator can determine the direction of the current trend or its absence.
If all three lines are intertwined, the Alligator "sleeps". At this time, the market is trading at a small price range (in the flat), selecting the trader earned on past price movement. The longer Alligator sleeps, the hungrier it gets, and the more powerful will be the subsequent price movement. While the Alligator is asleep, stay square. Waking up, Alligator opens mouth (Balance lines diverge) and starts hunting for prey. After eating, alligator goes to sleep again (Balance Lines converge).
If the Alligator is not asleep, the market there is an upward or downward trend (production runs from Alligator):
Another useful feature of the Alligator – help identifying markings of Elliott waves. If the price is outside the Alligator’s mouth, the market formed a pulse wave, and if inside the mouth, then the correction.
The formula for calculating the Alligator:
Gator Oscillator – definition of periods "sleep" and "bodrostvovaniya" alligator
Gator Oscillator indicates the degree of convergence / divergence Balance lines (Fig. 2).
Gator indicator is displayed as two histograms:
All bars of each histogram are painted in green and red colors:
The main purpose of Gator Oscillator – help in the visual determination of the presence or absence of a trend. With the help of clearly visible periods of convergence and intertwining of Balance Lines – “sleep” Alligator – and periods of “awake.”
Fractals (Fractals) B. Williams – the first market measurement
Fractal buy – a series of five consecutive bars where the highest high before and behind him are two bars with lower highs.
Fractals provide the following signals:
If the fractal buy formed below the Alligator’s teeth or fractal for sale – above the Alligator’s teeth, then such a deal to miss, so as not to feed the alligators. Fractals are active or until their “defeat”, or until the new fractal in the same direction (in this case, the previous signal is canceled and the pending order is removed). Critically important, where it was "amazed" fractal, ie, on which bar you need to enter the market after overcoming the fractal. If this bar is outside the Alligator’s teeth, then the transaction is allowed.
Fractals – this is the first measurement of the financial market.
Magic Oscillator Bill Williams (Awesome Oscillator – AO) B. Williams – the second dimension of the market
Magic oscillator (Awesome Oscillator – AO) determines market momentum (the second dimension) at the moment of the last 5 bars, comparing them with the driving force of the last 34 bars.
The green colored each column that is above the previous one, and red – each column of which is below the previous one. Magic Oscillator generates three buy signals and three sell signal, which can not be used until such time until the first filled with fractal buy (sell) outside the Alligator’s mouth.
Awesome Oscillator (AO): signals to buy / sell "saucer"
Buy signal "saucer" Signal occurs when the bar graph located above the zero line, it changes its direction from downward to upward (Fig. 5).
After the formation of the signal expose pending order Buy Stop 1 tick above the signal bar. The latest buy signal "saucer" cancels all previous ones (do not forget to delete pending orders after the cancellation of the signal).
a sell signal "saucer"
Awesome Oscillator (AO): signals to buy / sell "line zero crossing"
The signal to buy (sell) "line zero crossing" It appears when the histogram crosses the zero line upwards (downwards) – see Fig.. 7.
Awesome Oscillator (AO): buy / sell signals "two peaks"
The signal to buy (sell) "two peaks" Awesome Oscillator (AO) of the indicator is generated when the histogram is below (above) the zero line and the last bedplate indicator Awesome Oscillator above (last indicator peak below) previous. Thus between these bottoms (peaks) histogram did not rise higher (not lower than) zero (Fig. 8).
In this case also expose pending order Buy Stop (Sell Stop) 1 pip above the high (below minimum) signal bar.
Third Dimension: how to measure the acceleration / deceleration of the driving force through Acceleration / Deceleration Oscillator (AC)
Indicator Acceleration / Deceleration (Acceleration / Deceleration, AC) measures acceleration and deceleration of the driving force (the third dimension).
Suppose the ball is rolling down the street (via the Awesome Oscillator can determine its driving force). If the road goes uphill, then the ball will start to slow down (ie, it will have the reverse acceleration), and although the Awesome Oscillator (AO) will continue to correctly determine the momentum of the ball, will soon come a time when the ball stops. To this point, the trader did not catch by surprise, B. Williams suggests using Acceleration / Deceleration Indicator (AC) for the measurement of acceleration. Before it will change the dynamics of prices, the driving force of change. And before change acceleration. Therefore, the Acceleration / Deceleration indicator – an important component of successful trading.
The histogram MetaTrader 4 Acceleration / Deceleration (AU), – a difference between the histogram Awesome Oscillator and 5-period moving average of Awesome Oscillator:
Unlike Magic Oscillator AO crossing the zero line indicator Acceleration / Deceleration (AC) signal is not. But still can not buy, if the column is red and may not be sold, if the column is green. Also Acceleration / Deceleration signals (AC) shall be ignored by the trader up to the moment until the first filled with fractal buy (sell) outside the Alligator’s mouth.
Acceleration / Deceleration Oscillator (AC): a buy signal "above the zero line" / for sale "below zero"
Buy signal "above the zero line" indicator Acceleration / Deceleration Oscillator (AC) is formed, if there are two consecutive columns with higher values than the smallest last column. The histogram is above the zero line (Fig. 10).
a sell signal "below zero" Acceleration / Deceleration Oscillator (AC) is formed, if there are two consecutive columns with lower values than the greatest last column. The histogram is below the zero line.
Acceleration / Deceleration Oscillator (AC): buy signals "below zero" / for sale "above the zero line"
If AC histogram below zero, the signal to buy "below zero"It is formed when there are three consecutive column with higher values than the smallest last column.
If column "AT" or "FROM" histogram crosses the zero line, column "FROM" It becomes the signal, and there is no need to wait for a column "D".
Zone Trading – fourth market dimension B. Williams
When the driving force (Awesome Oscillator – AO) and acceleration (Acceleration / Deceleration – AC) in the same direction (both green or both red) – this means that the driving force is not only moving in that direction, but is still accelerating. This is based on the principle of zonal trade (fourth dimension B. Williams).
If AC and AO of the current column of green, this indicates the green zone. For clarity, this bar can be colored in green.
In order to open a new buy position in the green zone (for sale in the red zone) is necessary for at least two consecutive green (red) bar, the closing price of the second bar must be higher (lower) the closing price of the previous bar.
However, after five green or red bars in a row, we stop "added"Because more than 6-8 bars, painted in the same color, is rare.
The fifth dimension: Trade Balance Lines
Balance Line – This line, which would be in the price, if it had not received new information (Chaos) affecting the market at the moment. B. Williams tried using complex mathematical calculations and simulations on the computer to find the line balance sheet and build a histogram, which would show the distance between the price and the Balance Line. To his surprise, it turned out that the distance very well and is described Awesome Oscillator histogram with sufficient reliability.
In this case, the bar "b" will be "basic". Thus, we come to the definition of "base bar".
If you find the base bar to buy or sell, then you at least have passed her first halfway to the transaction in the framework of the fifth dimension B. Williams Market.
The fifth dimension: Buy signal above the Balance Line
Signal to buy above Balance Line
According to this rule for the appearance of buy signal we only need to overcome the high price of the nearest previous bars with a higher high than the base bar. I’ll try to explain this idea with the help of Fig. 13.
Suppose that on the screen we see only bar №1 and all previous. №2,3 bars, etc. not yet. At this point, a bar №1 begins to fall under the definition of the base bar to buy. This will be the current bar, which has a high below the previous bar.
The fifth dimension: buy signal below the Balance Line
It is obvious that buying below the Balance Line, we hope that the price "will go" to Balance Line, we will "ascend a mountain".
Suppose formed bar "B". This bar is basic, because he was the first, as viewed from left to right, a bar with a minimum peak. Now for the signal we need to find the maximum of 2 to the left of the base bar "B". Bar "3" It will be the first of them. Bar "2" We will not meet our criteria, as its maximum below the high of the bar "3". Bar "1" will be our second peak, we are looking for. His high above the high of the bar "3". Therefore, we place a pending order Buy Stop at 1 pips above the high of the bar "1".
The Fifth Dimension: Sell signal below the Balance Line
Sell signal below the Balance Line is very similar in nature to a buy signal above the Balance Line. In both cases, the emphasis is on "removal" prices from the Balance Line.
As usual, it will be easier to understand the basic principles of search signal to sell below the Balance Line, if you break the situation depicted in Fig. 15.
Let us assume that we see on the screen only bar "B" and all previous bars. If you look from right to left, the bar "B" will be the base, ie, it will be the last bar, the minimum price which is higher than the previous bar’s low.
Fifth Dimension: sell signal lines above the Balance
At its core, a sell signal above the Balance Line is very similar to a buy signal below the Balance Line. In both cases, the emphasis is on "approximation" prices for Balance Line, ie price will "ascend a mountain".
Suppose that we see in the graph only bar "2" and all the previous ones. Bar "2" becomes the base bar, because This is the first bar from right to left, which has a minimum price above the low of the previous bar.
Therefore, the appearance of the bar "2" expose a pending Sell Stop order 1 tick below the minimum price of the bar "0". The appearance of the bar "3" does not violate the picture bar "2" It remains basic, and the pending order has not yet responded. The same can be said of the bar "4".
at the bar "6" pending order is triggered and the sell signal above the Balance Line is realized.
However, the signals of any market measurement, starting from the second, should be ignored by the trader up to the moment until the first filled with fractal buy (sell) outside the Alligator’s mouth.
How to exit the market, capturing at least 80% of the traffic
Sensitive to the price dynamics of the market exit technique allows to lock in profits in the last 10% of the trend, capturing not less than 80% of the traffic (according to B. Williams).
Bill Williams suggested several ways to install a Stop Loss order:
Also of note is the indirect signal the end of the trend – bullish divergence / bearish convergence indicator Awesome Oscillator (AO) and prices (see Figure 17..).
To summarize, it should be noted that, before the execution, and the first signal from the first measurement (fractals) signals of other measurements (Awesome Oscillator – AO, Acceleration / Deceleration – AS, trade zonal and fifth measurements – Balance lines) are ignored.
But after the opening of the first position on the fractal signal trader "adds" this position every time when there is a signal from any of the five dimensions. As a result, when the market moves 30% of traders manage to earn 90-120%.
Recently, Bill Williams’ approach to trade in the financial markets has become very popular among traders of the FOREX market. The authors recommend the reader to analyze charts of currencies in order to find the ins and outs of the procedure B. Williams and get an objective picture of the profitability of this trading strategy.
Based on materials from the books by Bill Williams "trading chaos". "New Trading Dimensions
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