FOREX Bill Williams
Strategy Bill Williams u>Center>
System B. Williams - the most ambiguous and controversial strategy of our time. Someone earning her dozens and hundreds of thousands of dollars, someone (an absolute majority) always loses. In any case, if you understand it to the depths, you'll no doubt be able to earn good money on it. Basically, all the prerequisites for this strategy are based on the « Chaos Theory » - the theory of random walks, which will be found grain patterns.
traditionally perceived as chaos chaotic structure, although in fact its essence rather exactly the opposite of chaos.
Chaos - a higher degree of order, where the organizing links are unsystematic and accidental as opposed to cause-effect relationships. Chaos is permanent, temporary stability. Financial Markets - causing chaos.
In the linear world of cause and effect are predictable. In the nonlinear (real) world of the relationship between cause and effect does not exist. Therefore, in terms of B. Williams, using fundamental and technical analysis can not receive regular income in the financial market.
In accordance with Chaos Theory that an investor who starts from a linear perspective, will never see the "real" market, thus risking permanent loss carry. Chaos theory denies that, based on what technical analysis: 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 mastery of trading on financial markets, you need to know the very structure of the market. This can be achieved by examining the market in five dimensions:
- Fractal (phase space)
- Driving force (power phase)
- Acceleration / deceleration (power phase)
- Zone (a combination of strength / power phase)
- Balance Line
Each dimension adds extra 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 before the appearance and performance of the first signal from the first measurement ( fractals ) signals from other measurements ( AO , AC , trade zone and Balance Line ) are ignored. But after the opening of the first position on the fractal signal trader "adds" to this position every time 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 price dynamics technique allows exit from the market to take profits in the last 10% of the trend, capturing not less than 80% of traffic (according to B. Williams ). Recently, the approach of B. Williams to trade on financial markets has become very popular among traders of the market FOREX.
For each of the principles of the Bill Williams set up his display, which helps determine the necessary phase.
driving force (the energy of phase). Bill Williams Alligator (Alligator)
- Alligator Bill Williams (Alligator) - a combination of three lines of the balance (Fig. 1):
- Jaw Alligator (blue line) - a 13-day moving average at the median price (High + Low) / 2, moved to 8 bars into the future;
- Alligator's Teeth (red line) - 8-period moving average at the median price (High + Low) / 2, moved by 5 bars into the future;
- Alligator's Lips (green line) - a 5-period moving average at the median price (High + Low) / 2, moved to 2 bars in the future.
With Alligator You can determine the direction of an existing trend or lack of it.
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 sleeps Alligator , the hungrier it gets, and the stronger will be the subsequent price movement. While Alligator asleep, stay out of the market! Waking up, Alligator opens mouth (Balance lines diverge) and starts to hunt for prey. After eating, Alligator back to sleep ( Balance Line converge).
If Alligator is not sleeping, the market is bullish or bearish trend (production runs from Alligator ):
- If the price is above the Alligator's mouth, the trend is upward;
- If the price is below the Alligator's mouth, the trend is downward.
Another useful feature Alligator - assist in determining the layout of Elliott Waves. If the price is outside the Alligator's mouth, the market is formed by pulse wave, as if inside the mouth, then the correction.
Gator Oscillator - the definition of the periods of "sleep" and "wakefulness" Alligator .
Gator Oscillator indicates the degree of convergence / divergence Balance Line .
indicator Gator is displayed as 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 colors:
- Ctolbik colored red if its value is lower than the previous column;
- Ctolbik turn green, if its value is above the value of the previous column.
main goal Gator Oscillator - to help visually determining the presence or absence of a trend. With it, the periods are clearly visible and closer weave Balance Line - «Dream" Alligator - and periods of "wakefulness».
Fractal (phase space)
Fractals (Fractals) B. Williams - the first measurement of market u>
Fractal to buy - a series of five successive bars, which assigns the highest high and behind him are two bars with lower highs. Fractal for sale - a series of five successive bars, which assigns the lowest low and behind him are two bars with higher minimums. Fractals for the purchase and sale may consist of the same bars.
Fractals serves the following signals:
- If fractal to buy is above the Alligator's Teeth (red line), the pending order Buy Stop to open the position should be placed 1 tick above the high bar, which was formed fractal ;
- If the fractal for sale is below the Alligator's teeth, the deferred Sell Stop order must be placed 1 tick below the low bar, which formed a fractal.
If fractal to buy formed below the Alligator's Teeth or fractal for sale - above the Alligator's teeth, then the transaction must pass in order not to feed Alligator . Fractals are active or until their "defeat", or before a new fractal in the same direction (in this case the previous signal is canceled, and the pending order is taken). It is critically important, where he was "astonished" fractal, ie, on which bar to enter the market after overcoming a fractal. If the bar is outside the Alligator's teeth, then the transaction is allowed.
Fractals - this is the first measurement of the financial market. Any entry into the market begins with the overcoming of the fractal. Only once was overcome first fractal, we begin to receive signals from other measurements (indicators of 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 the basis for additional trades.
driving force (energy phase)
Magic oscillator Bill Williams (Awesome Oscillator - AO) B. Williams - the second dimension of the market u>
Magic oscillator ( Awesome Oscillator - AO ) determines the driving force of the market (second dimension) is currently the last 5 bars, comparing them with the driving force for the last 34 bars. < / p>
Awesome Oscillator - is the difference obtained by subtracting the 34-period simple moving average, which was built on the central points of the bars (H + L) / 2, 5-period SMA on the central the bars (H + L) / 2. The graph display is represented as a histogram.
in green painted each column, which is higher than the previous one, and red - each column, which is lower than the previous one. Magic Oscillator generates three buy signals and three sell signal, which can not be used until such time until the first full fractal buy (sell) outside the Alligator's mouth.
Awesome Oscillator (AO): signals for buy / sell "saucer" u>
signal to buy "saucer" signal occurs when the histogram is located above the zero line changes its direction from downward to upward.
column "A" should be above the column "B" and can be any color. Column "B" must be red. Column "C" (signal) must be green. Signal Bar - a bar, which formed a column signal.
After the formation of a signal are putting aside Buy Stop order 1 pip above the signal bar. The most recent buy signal "saucer" will cancel all previous ones (do not forget to delete pending orders cancel after the signal). For all types of signals is the rule: buy only if the current column is green, and sell only if the current column is red.
Acceleration / Deceleration (phase force)
third dimension: Acceleration / Deceleration Oscillator (AC) u>
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 (with Awesome Oscillator can determine its momentum.) If the road goes uphill, the ball begins to slow down (ie it will have the reverse acceleration), and although Awesome Oscillator (AO) will still correctly identify the driving force of the ball, will soon come a time when the ball stops. To this point, not a trader caught off guard, B. Williams suggests using indicator Acceleration / Deceleration (AC) to measure the acceleration. Before the dynamics will change prices, change the driving force. And before that will change the acceleration. Therefore, the indicator Acceleration / Deceleration - an important component of successful trading.
In MetaTrader 4 histogram Acceleration / Deceleration (AC) - the difference between histogram Awesome Oscillator and 5-period moving average for the Awesome Oscillator:
MEDIAN PRICE = (HIGH + LOW) / 2
AO = SMA (MEDIAN PRICE, 5) - SMA (MEDIAN PRICE, 34)
AC = AO - SMA (AO, 5)
MEDIAN PRICE - median price;
HIGH - the maximum price of the bar;
LOW - the minimum bar price;
SMA - simple moving average;
AO - LED Awesome Oscillator.
Unlike Magic Oscillator SA crossing the zero line indicator Acceleration / Deceleration (AC) signal is not. But you still can not buy, if the column red, and may not be sold, if the column is green. Also signals Acceleration / Deceleration (AC) should be ignored until the trader, until the first full fractal buy (sell) outside the Alligator's mouth.
Acceleration / Deceleration Oscillator (AC): signal to buy "above zero line" / for sale "below zero"
signal to buy "above zero line" indicator Acceleration / Deceleration Oscillator ( AC ) is formed, if there are two consecutive columns with higher values than the last column of the smallest.
signal for sale "below zero" Acceleration / Deceleration Oscillator ( AC ) is formed, if there are two consecutive columns with lower values, than the last column of the greatest
If AC histogram below zero, then a buy signal 'below zero "is generated when there are three consecutive columns with higher values ??than the last column of the smallest.
Order Buy Stop is located at 1 tick above the high of the signal bar.
If the histogram Acceleration / Deceleration Oscillator (AC) above zero, then a sell signal "above the zero line" is formed when there are three consecutive columns with lower values ??than the latest greatest
Zone Trade (fourth dimension)
When the driving force ( Awesome Oscillator - AO) and acceleration ( Acceleration / Deceleration - AC) in the same direction (both green and red both ) - this means that the driving force not only moving in that direction, but still faster. On this principle is based zonal trade (the fourth dimension of B. Williams).
If current columns AC and AO green, it shows a green area. If the current columns AC and AO are red, it shows the red zone.
In order to open new positions for the purchase of a green area (on sale in the red zone) must be at least two consecutive green (red) bar, with a closing price of the second bar should be higher (lower) prices close of the previous bar.
However, after five green or red bars in a row we lose, "added," because more than 6-8 bars, painted in a color that is rare.
In the case of fifth green (red) bar to set the Stop Loss order 1 tick below the minimum (above the high) of the fifth bar. If the next bar stop is not executed, then it should be changed to a level that at one tick below the minimum (above the high) of the sixth bar, etc.
fifth dimension: Trade Balance Line
Balance Line - this line, which was a price if it had not received new information (Chaos), affecting the market at this time. B. Williams tried using a complex mathematical calculations and computer simulations to find this line of balance and a histogram, showing the distance between the price and the balance line. To his surprise, it turned out that this distance is very good and with a sufficient degree of reliability is described histogram Awesome Oscillator.
If you think Line of Balance in the form of the mountain top, then when the market enters new information, the price is easier to get away from Balance Line , then going back to it ("easier to go down the hill than climb it ").
In order to understand the fifth dimension and learn to trade the Balance Line, carefully examine Fig. 12:
Buyers were weaker at the bar "b" in comparison to the bar "a". This proves a lower high bar "b".
Why sellers were stronger at the bar "b"? Because the market received new information (in the figure indicated by the dotted square), which changed the balance of power.
If buyers take heart and be able to lift the market (see the bar "c") above the high bar "a", it means that there has been a dramatic change in the behavior of the stock of the crowd, which is a harbinger of our transactions in the fifth dimension.
Fig. 12. New information on the chart
In our case, the bar "b" would be "basic." Thus, we come to the definition of "base bar".
Basic bar for a signal to buy - this is either the current bar (bar "b", when there was no bar "c"), or the most recent lowest apex (bar "b" after the bars with a higher high - bar "c"). Basic bar for a sell signal - this is either the current bar, or the most recent with the highest bottomed.
formulate first three postulates of the fifth dimension :
- Study the chart from right to left.
- Pay attention only to the maximum, if looking for a buy signal. Pay attention only to the minimum if the search time to sell.
Find the base bar: to signal to buy (sell) the base bar will be a current or bar, or the last bar with the minimum maximum (maximum minimum). If you find a base bar to buy or sell, you will at least receive his first halfway to the transaction in the fifth dimension of the market B. Williams.
fifth dimension: a buy signal above the Balance Line
signal to buy above the Balance Line. If the price is above the Balance Line, and we are looking for a signal to buy, we hope that the price "gone" from the Balance Line, ie, "Go down the hill"). We introduce a new rule - Rule number 4:
to buy (sell) need one new maximum (minimum), if you go from the Balance Line, and two new high (or low), if you approach the Balance Line.
According to this rule for the appearance of a buy signal, we need only to overcome the high price of the nearest preceding bars with a higher high than in the base bar. I'll try to explain this idea with the help of Fig. 13.
assume that on screen we see only the bar number 1 and all previous ones. ¹ 2,3 bars, etc. yet. At this point, 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 bar high.
essence signal to buy above the balance line is that we are putting aside Buy Stop order 1 pip above the high bar, which was preceded by a base bar (ie bar number 1 in our case).
Returning to Fig. 13. The graph appears bar number 2, whose high is lower than the bar number 1. Automatically bar number 2 becomes the base bar. We cancel a pending order exhibited in the previous case and set a Buy Stop at pips above the high bar number 1 (this bar is a preceding base bar - the bar number 2). The same procedure is repeated on the bar and number 3 on the bar "B". When you see the bar "B" it becomes the base bar, and the pending order is 1 tick above the high bar number 3.
is followed by bar number 4, but the bar "B" remains the benchmark, because if you look from right to left, it will be the first bar with the lowest peak. Maximum bar ¹ 4 lower than the level exhibited by us of a pending order, so we are not in the market. There is a bar number 5, which also did not change the position of the base bar and did not fulfill our pending order. But the appearance of the bar number 6 with a maximum of more than the maximum of the bar prior to the base, has led to what our Buy Stop hit and we have entered the market on "signal to buy above the Balance Line".
fifth dimension: a buy signal below the Balance Line
Obviously, buying below the Balance Line, we hope that the price of "go" to the Balance Line, we will "climb the mountain".
So we do not need a maximum, but two, to get a buy signal below the Balance Line. To Fig. 14.
Suppose formed bar "B". The bar is basic, because He was the first, if you look from right to left, a bar with a minimum peak. Now to get the signal we need to find 2 of the maximum to the left 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 high bar "3." Bar "1" will be our second maximum, which we seek. His high above the high bar "3." Therefore, we place a pending order Buy Stop at 1 tick above the high bar "1".
appearance of the bar "4" did not introduce any changes in the overall picture: the base bar is still "B", and the pending order is not executed. Bar "5" also did not bring change. But at the bar "6" worked our pending order and the signal of the fifth dimension to purchase below the Balance Line realized.
Bill Williams has proposed several ways to install Stop Loss order:
- If there is a trend in the market, the position must be closed if the bar's closing price crosses the teeth Alligator (red line).
- On the fast-moving market as a level Stop Loss warrant using Alligator's Lips (green line). The market recognizes the rapid, if the angle of inclination greater than the price the green line. In this method, and at the end of the previous current bar the Stop Loss order level shifts to the red or the green line for the next bar.
- We expose Stop Loss order after the fifth in a row bar in the green (red) zone (this method is discussed above in the description of area trade).