Without a doubt, the system B. Williams - the most ambiguous and controversial strategy of our time. Someone makes it hundreds of thousands of dollars, someone (an absolute majority) continuously loses.
In any case, if you understand it to the depths, you will no doubt be able to earn good money at it.
Basically, all the prerequisites for this strategy based on the «Chaos Theory» - the theory of random walks, which will be found grain patterns. Traditionally, chaos is seen as a disordered structure, although in reality it is the opposite nature rather chaotic.
Chaos - this is a higher degree of order, which is organizing the links and the lack of randomness as opposed to cause-effect relationships. Chaos constant temporal stability. Financial Markets - generation of chaos.
In the linear world of cause and effect is predictable. In the non-linear (real) world, such a relationship between cause and consequence of non-existent. Therefore, in terms of B. Williams, the use of fundamental and technical analysis can not receive regular income in the financial market.
In accordance with the Chaos theory is the investor, which is starting from a linear perspective, will never see the "real" market, thus, bear the risk of permanent loss. Chaos theory is refuted, what is the basis of technical analysis: the behavior of the market in the future like the past.
Bill Williams believed that the reason that traders lose in the market, is that they too rely on various types of analysis, which he believed "in reality does not work, so they are useless and even dangerous."
In order to achieve excellence in the trade in financial markets, you need to know the very structure of the market. This can be achieved by exploring the market in five dimensions:
Fractal (phase space)
The driving force (power phase)
Acceleration / deceleration (power phase)
Zone (a combination of strength / power phase)
Line Balance
Each dimension adds additional information to the general picture of the market, so to fully understand his need to "measure" the market in all five dimensions.
It should be noted that prior to the appearance and performance of the first signal from the first dimension (fractals), the signals of other measurements (AB, AC, zonal trade and Balance lines) are ignored. But after the first position on the fractal signal trader "adds" to that position every time you receive the signal from any of the five dimensions. As a result, when driving the market in 30% of the trader managed to earn 90-120%.
Sensitive to price dynamics technique out of the market allows you to record profits in the last 10% of the trend, capturing not less than 80% of traffic (from the words of B. Williams). Recently, B. Williams approach to trade in financial markets has become very popular among traders in the market FOREX.
For each of the principles of Bill Williams has created his own indicator that helps determine the appropriate phase.
The driving force (power phase). Bill Williams Alligator (Alligator)
Bill Williams Alligator (Alligator) - a combination of three lines of the balance (Fig. 1):
Alligator jaw (blue line) - This 13-periodnaya moving average for central price (High + Low) / 2, displacement of 8 bars in the future;
Alligator teeth (red line) - This 8-periodnaya moving average for central price (High + Low) / 2, displacement by 5 bars into the future;
Alligator Lips (Green Line) - This 5-periodnaya moving average for central price (High + Low) / 2, displacement of 2 bar in the future.
With the Alligator can determine the direction of the current trend or its absence.
If all three lines are intertwined, the Alligator is asleep. " At that time, the market traded in a small price range (for Flat), selecting from a trader gained in the last movement of prices. The longer the Alligator is asleep, the more he becomes hungry, and the more powerful will follow the movement of prices. While the Alligator is asleep, stay away from the market! Woken up, Alligator disclose mouth (Balance lines diverge) and starts to hunt for prey. Naevshis, Alligator again falls asleep (Balance Lines converge).
If the Alligator does not sleep in the market, there is upward or downward trend (production runs from Alligator):
if the price is higher feed Alligator, the trend is upward;
if the price is below the mouth Alligator, the trend is bearish.
Another useful feature Alligator - assistance in identifying markings Elliott waves. If the price is outside the Alligator mouth, the market formed by pulse wave, as if inside the mouth, then correcting.
Gator Oscillator - definition of periods of "sleep" and "bodrostvovaniya Alligator
Gator Oscillator shows the degree of convergence / divergence Lines balance.
Gator indicator appears in the form of two histograms:
histogram above zero shows the distance between the blue and red lines (jaw and teeth);
histogram below zero shows the distance between the red and green lines (teeth and lips).
All bars of each histogram are colored in green and red color:
Column painted in red if its value lower than the previous column;
Column painted in green, if its value above the previous value of the column.
The main purpose of Gator Oscillator - assist in visually determining the presence or absence of trend. With the help of visible periods of convergence and overlap Lines Balance - «sleep» Alligator - and during his «awake».
Fractal (phase space)
Fractals (Fractals) B. Williams - the first measurement of market
Fractal for purchase - a series of five successive bars, followed by the highest peak and it is for two bars with lower maxima. Fractal for sale - a series of five successive bars, followed by the lowest minimum and it is for two bars with higher minimums. Fractals for the purchase and sale may consist of the same bars.
Fractals submit the following signals:
if the fractal is higher than for the purchase of Zubov Alligator (red line), the pending order Buy Stop at the opening position should be placed at 1 pips above the maximum of the bar, which was formed fractal;
fractal if the sale is below the Alligator Zubov, a pending order Sell Stop should be placed at 1 pips below the minimum bar, which was formed fractal.
If the fractal to purchase an Alligator Zubov below or fractal for sale - above Zubov Alligator, then the transaction must be omitted so as not to feed the Alligator. Fractals are active, or until their «defeat», or to the emergence of a new fractal in the same direction (in this case the previous signal has been canceled, and the pending order is removed). Critical, where he was "astonished" fractal, ie, what you need to enter a bar in the market after overcoming fractal. If the bar is outside the Alligator Zubov, then the transaction is allowed.
Fractals - this is the first measurement of the financial market. Any entry into the market begins to overcome the fractal. Only after being overcome first fractal, we start to receive signals from other measurements (indicators B. Williams) to open new positions in the direction of the first signal. The signals from the future of fractals in the direction of the first transaction will also serve as a basis for opening additional positions.
The driving force (power phase)
Magic Oscillator Bill Williams (Awesome Oscillator - AO) B. Williams - a second dimension of market
Magic oscillator (Awesome Oscillator - AO) defines the driving force behind the market (second dimension) at the time of the last 5 bars, comparing them with the driving force in the last 34 bars.
Awesome Oscillator - the difference obtained by subtracting 34-periodnogo simple moving average, which was built on the central values of the bars (H + L) / 2, from 5-periodnoy SMA on the central values of the bars (H + L) / 2. The graph indicator appears in the form of histograms (Fig. 4).
Fig. 4. The use of magic oscillator (Awesome Oscillator) to determine the driving forces of the market
In the green painted each column, which is higher than the previous, and red - each column, which is lower than the previous one. Magic oscillator creates a signal for the purchase of three and three signals for the sale, which can not be used until such time until the first filling fractal to buy (sell) outside of the mouth Alligator.
Awesome Oscillator (AO): signals for buy / sell "saucer"
The signal for the purchase of "saucer" signal occurs when the histogram is located above the zero line, changing direction from downward to upward (Fig. 5).
Column "A" should be above the column "B" and can be any color. Column "B" shall be red. Column "C" (signal) must be green. Signal bar - a bar, where an alarm column.
After formation of the signal exhibits a pending warrant Buy Stop at 1 pips above the signal bar. The last signal on the purchase of "saucer" supersedes all previous (do not forget to delete the pending order after the lifting of the signal). For all types of signals of the rule: Buy only if the current column, green, and sell only if the current column is red.
Acceleration / deceleration (power phase)
The Third Dimension: Acceleration / Deceleration Oscillator (AC)
Indicator acceleration / Deceleration (Acceleration / Deceleration, AC) measures acceleration and deceleration of the driving force (the third dimension).
Suppose the ball rolling on the street (using Awesome Oscillator can determine its momentum). If the road goes uphill, the ball begins to slow down (ie it has the reverse acceleration), and although the Awesome Oscillator (AO) will continue to determine the driving force behind the ball, will soon come a time when the ball stops. To this point, the trader is not caught unawares, B. Williams suggested using the indicator Acceleration / Deceleration (AC) for the measurement of the acceleration. Before you change the dynamics of prices, change the driving force. Earlier change acceleration. Therefore, the indicator Acceleration / Deceleration - important part of successful trading.
In MetaTrader 4 histogram Acceleration / Deceleration (AC) - the difference between histogram Awesome Oscillator and 5-periodnym moving averages for the Awesome Oscillator:
MEDIAN PRICE = (HIGH + LOW) / 2
AO = SMA (MEDIAN PRICE, 5) - SMA (MEDIAN PRICE, 34)
AC = AO - SMA (AO, 5)
Where:
MEDIAN PRICE - median price;
HIGH - the maximum price of the bar;
LOW - the minimum price the bar;
SMA - simple moving average;
AO - LED Awesome Oscillator.
Unlike magic oscillator AB crossing the zero line indicator of Acceleration / Deceleration (AC) signal is not. But still can not buy, if the column is red, and can not be sold, if the green column. It also signals Acceleration / Deceleration (AC), the trader should be ignored until such time until the first filling fractal to buy (sell) outside of the mouth Alligator.
Acceleration / Deceleration Oscillator (AC): a signal to sell above the zero line / sell at below the zero line
The signal to sell above the zero line "indicator of Acceleration / Deceleration Oscillator (AC), if a two consecutive columns with higher values than the most recent lowest column.
The signal to sell below the zero line "Acceleration / Deceleration Oscillator (AC), if a two consecutive columns with lower values than the latest greatest column
If the AC histogram below zero, the signal to sell below the zero line "is formed when a column of three consecutive higher values than the most recent lowest column.
Buy Stop Order is placed at 1 pips above the maximum of the signal bar.
If the histogram Acceleration / Deceleration Oscillator (AC) above zero, the signal to sell above the zero line "is formed when a column of three consecutive lower values than the latest greatest
Zonal trading (fourth dimension of the market)
When the driving force (Awesome Oscillator - AO) and acceleration (Acceleration / Deceleration - AU), directed to one side (both green or both red) - this means that the driving force not only moving in that direction, but also accelerating. This principle is based trade zone (fourth dimension B. Williams).
If the current columns of the AU and AO green, it shows the green zone. If the current columns of AU and AB red, it shows the red zone.
In order to open new positions on the purchase of green area (at the sale in the red zone) must be at least two consecutive green (red) bars, while the closing price of the second bar must be above (below) the closing price of the previous bar.
However, after five green or red bars in succession, we cease to "add", as more than 6-8 bars, painted in one color, are rare.
In the case of the fifth green (red) bar should be set the Stop Loss order at 1 pips below the minimum (above the maximum) price of the fifth bar. If the next bar stop-order is not executed, then you need to change the level, which at 1 pips below the minimum (above the maximum) price of the sixth bar, etc.
The fifth dimension of the market: Trade Balance Lines
Balance Line - this line, which would have been the price, if no new information (Chaos), which has an impact on the market at this time. B. Williams tried using complex mathematical calculations and computer simulations to find the line balance and to build a histogram, showing the distance between the price and the line balance. To his surprise, it turned out that this distance is very good and with a sufficient degree of reliability is described by the histogram Awesome Oscillator.
If the present Line of balance in the form of the mountain top, when the market receives new information, the price is easier to withdraw from the line of balance, than to come back later to it (easier to go downhill than up to it ").
In order to understand the fifth dimension and learn to deal Lines balance carefully examine Fig. 12:
Buyers were weaker at the bar "b" as compared to the bar "a". This proves a lower maximum bar "b".
Why sellers were stronger at the bar "b"? Because the market was new information (in the figure indicated by the dotted squares), which altered the balance of power.
If buyers get the spirit and be able to lift the market (see the bar "c") above the maximum of the bar "a", it means that there have been dramatic change in the behavior of stock market crowd, which is a harbinger of the transaction in the fifth dimension.
Fig. 12. New information in panel pricesIn our case, a bar "b" will be "basic." Thus, we come to the definition of "basic bar.
The base bar for the signal to buy - either the current bar (bar "b", which was not yet bar "c"), or the last with the lowest peak (bar "b" after the appearance of the bar with a higher maximum - bar "c "). The base bar for the signal to sell - either the current bar, or the latest with the highest bottom.
Formulate the first three postulates fifth dimension:
Study the chart, right to left.
Pay attention only to the maximum, if looking for a signal to buy. Pay attention only to the minimum, if you're looking for currently for sale.
Find the base bar: for the signal to buy (to sell) the base bar will be a current or bar, or the last bar with the minimum maximum (maximum minimum).
If you have a basic bar to buy or sell, you at least have passed their first half-way to commit the transaction in the fifth dimension market B. Williams.
The fifth dimension of the market: the signal to buy above the Balance
The signal to buy above the Balance If the price is above the balance, and we are looking for a signal to buy, we hope that the price will go "in front of the line balance, ie "to come down under the mountain"). Enter the new rule - Rule number 4:
To buy (sell) needed another new maximum (minimum) if you go in front of the line balance, and two new maximum (minimum), if you approach the line balance.
According to this rule for the appearance of a signal to buy, we need only to overcome the high price of the nearest of the previous bars with a higher peak than in the base bar. I'll try to explain this idea with the help of Fig. 13.
Suppose that on the screen we see only the bar number 1 and all previous ones. № 2,3 bars, etc. yet. At this point the bar number 1 begins to fall under the definition of the base bar to buy. This will be the current bar, which is lower than the previous high bar.
The essence of the signal above the line on the purchase balance is that we hold pending order Buy Stop at 1 pips above the maximum of the bar, which was preceded by the base bar (ie bar number 1 in our case).
Back to Fig. 13. The graph is a bar number 2, whose high is lower than that of the bar number 1. Automatic bar number 2 becomes the base bar. We cancel the pending order exhibited in the previous case and exposes Buy Stop at 1 pips higher than the maximum number 1 bar (this bar is a basic pre-bar - bar number 2). The same procedure is repeated at the bar number 3 and at the bar "B". When you see the bar "B", it becomes a basic bar, and the pending order is located at 1 pips higher than the maximum number 3 bar.
Then a bar number 4, but the bar "B" continues to be basic, because if you look right-left, it will be the first bar with the lowest maximum. Maximum bar number 4 is lower than the level we have put pending order, so we are not yet in the market. Appears bar number 5, which also did not change the basic position of the bar and did not fulfill our pending order. But the appearance of the bar number 6 with a maximum greater than the maximum of the bar before the base, has resulted in our Buy Stop worked and we have entered the market for "a signal to buy above the Balance."
The fifth dimension of the market: the signal to buy below the Balance
Obviously, the buying below the Balance, we hope that the price will go "to the line of balance, we would" climb the mountain. "
So, we need more than one maximum, as much as two to get the signal to buy below the line balance. Let us turn to Fig. 14.
Suppose an bar "B". This bar is basic, because he was the first, if you look right, left, a bar with a minimum peak. Now to get the signal we need to find a maximum of 2 on the left side of the base bar "B". Bar "3" will be the first of them. Bar "2" would not meet our criteria, because its maximum below the maximum of the bar "3." Bar "1" will be our second peak, which we are looking for. Its high maximum above the bar "3." Therefore, we place the pending order Buy Stop at 1 pips above high bar "1."
The appearance of the bar "4" has made changes in the overall picture: the base bar is still "B", a pending order has not yet been executed. Bar 5 also did not change. But at the bar, "6" worked our pending order and the fifth signal is measured on a purchase below the Balance realized.
Bill Williams has suggested several ways to set the Stop Loss orders:
If the market trend exists, the position must be closed if the closing price bar crosses the teeth Alligator (red line).
In a rapidly moving market, as the level for the Stop Loss order using Alligator Lips (green line). The market recognizes the rapid, if the angle of inclination angle higher prices of green line. In this way, and earlier at the end of the bar Stop Loss order is moved to the level of red or green line of the next bar.
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