In the analysis of the market is widespread so-called “chaos theory”, which the developer is Bill Williams. He claimed that accurately calculate the market is impossible. Drive the market in some frames and made to move by the rules is impossible, since news and events all around the world and accounts for every unrealistic.
Williams believed that, through analysis, based only on mathematical functions and graphical objects can not. The world does not lend itself to mathematical forecasting and straight lines in the world so little, if any, where any are present. Analyst conducting such an analysis on paper is likely to analyze their fantasies that have nothing to do with the surroundings. What would you have used mathematical development and technical means, spending this kind of analysis you will not have a steady income in the long run.
For the analysis, Williams suggested the use of five “dimensions”. In turn order can list them: fractal, the driving force of acceleration or deceleration zone, the balance line. These phases should be considered in turn. Consider to be the driving force after the appearance of a fractal, and accelerated only after the appearance of a driving force, and so on.
Unlike other types of analysis, in which decision-making requires the availability of sufficient information, the “chaos theory” suggests Williams to enter the market, starting with the first step. Signal appeared on the fractal to the input should be included and receive the following signals to build a position. Thus, the trader will profit much more than would wait for all signals at once, and went into the market, would be sitting around doing nothing.
Studying the “chaos theory” it should be noted that, despite some inconsistencies in the analysis, it remains one of the most popular theories in the financial markets. Next we consider the details of methods and tools, which will have to use when analyzing the market on this theory.
Chaos Theory. B. Williams The first step in this theory is a fractal. Williams Fractals 5 bars in a row is the average of which is located above or below the others. Fractal graph shows the local minima and maxima. The market entry point for Williams is the breakdown of the fractal. If the price rises above one point on a fractal up then you should buy. Accordingly, if the price drops below the fractal down to be sold. In practice this is easily accomplished with the help of a pending order. Stop hiding at a maximum distance of the order so that the last two fractal directed to the other side were within the protective stop.
The second step in the strategy of Williams is the driving force. To define it developed a special oscillator. Awesome Oscillator, it is available in MT4 and all you need is just to put it on schedule. Plotted based on the difference between two moving averages, 34-period moving and 5-period. The exact formula for the trade is not important, but if you want, it is also described in MT4.
The graph shows the oscillator as a histogram. If the current column is higher than the previous it is green, if it is below in red. Signals to buy and sell on this indicator are fairly simple. Consider a buy signal, sell signal similar only in the unfolded state. So, if the histogram is above the zero line, you must wait until after the motion histogram down to resume the upward movement. The first column of green, red, after a warning. More specifically bar, which corresponds to this column. And after the close of signal bar set aside an order to buy at one point higher than the maximum value of the candle.
Chaos Theory. B. Williams is another signal to the input for this indicator is crossing the zero line. Input method is similar. Put aside an order to buy or sell at a point above or below the signal bar. Signal bar is a bar located on the other side line. For example, if the histogram crosses the zero line from below, the buy order is higher than the maximum of candles, which corresponds to the first bar, located above the zero line.
The final signal for this indicator is a “two peaks”. If the oscillator is located below the zero line, and formed two bottoms, with the second floor above the first in this situation should enter the market to buy. So it is when the histogram is above zero, and formed two peaks, the second of which is lower than the first. This will be a signal to sell. The main thing here that between the peaks or bottoms price did not cross the zero line. The entrance is through a pending order, which is exposed at one point above the signal bar, where to buy. Signal bar is the first green bar. In the event of a sale the first red bar.
When working with this indicator should remember the basic rule. Purchase only happens when the green signal bar, and the sale when the red.
The next measurement B. Williams – is an indicator of the acceleration. In the literature, give an example with the ball. I think that the example of the pendulum would be more understandable. Suppose the pendulum was in its extreme position and begins to come back. At some part of the way he moves with acceleration. But not always. Having part of the way his speed starts to decline, although it will still move to the previous direction. So it is with the price in the market. The task of this step is to calculate the slowing market, so that, at least not to enter the market and not wait in vain drawdown. Well, at best objective indicator to find the start and accelerate the time to enter the market.
Chaos Theory. B. Williams, Acceleration / Deceleration or abbreviated AC determines the acceleration or deceleration in the market. Consider the signals from this indicator. It should be remembered that, like the indicator include the purchase of JSC can not, if the current column of red and come up for sale at the current green column.
If the histogram is above the zero line, then enter the purchase is necessary to have two green columns. Log is a pending order. Signal is the second column, green and, accordingly, the purchase of second red for sale. Provided that the histogram is below zero.
If the histogram is below zero, and a buy signal, to obtain such a signal is necessary to have three green columns. Accordingly, if the histogram is above zero, it must be three consecutive red bar to access the sale. The entrance is a pending order. Signal column is the third column of that color.
The intersection histogram zero line does not mean anything, but if there are three columns in a row of one color, but on different sides of the zero line, they set off a signal as if the do not cross zero.
Chaos Theory. B. Williams, The Fourth Dimension – this trade zones. It is easy to operate. If the columns of AB and AC of the same color, then comes a band of color. If the color histograms are different then a gray area, it did not sell. Suppose the column color green, respectively, and the green zone. To determine the area necessary for the two columns of the same color. The idea of a zone that, in addition, that the price moves in a certain direction, it still comes with the acceleration. So it’s a good point at the entrance. Accordingly, in the Green Zone buy, and sell in the red. It is recommended in the fifth column of the trail the stop band, because you may zone length is 6-8 bars.
The last fifth dimension – it’s trading on the balance line. The line can be represented graphically balance the peak of the mountain. If you received the news, and we walked away, the more we will be easier to run down the mountain rather than go back to the top. Signals on the balance line occur both from the bottom and top.
Entering the market to buy if the price is above the balance is with a pending order. We look forward to when the price begins to approach the line of balance, and place a stop above the high of the previous bar, which is below the maximum of the previous bar him. If the price will go on to the next line and the bar closes below the current one. That pending order should be moved to a point above the maximum of the last completed bar. Log on sale in the same manner with only the opposite.
Chaos Theory. B. Williams may include the purchase and the price is below the line of balance. Then you need to understand that we’re going to move up the hill. And it’s harder than roll down. Therefore, we must wait an additional bar. So, if the price started to roll back to the line of balance, you need two completed bars with highs above the previous ones. Then expose the pending orders.
So we looked at all the five dimensions on which Williams recommended to enter the market. It remains to deal with when coming out of the market. Williams proposed and the system output, in which, he argues, the market may pick up 80 percent of the trend.
Consider the exit point. The first point out that when the candle closes in red alligator. If the market rapidly, the intersection of the green line Alligator reason enough to exit the market. Rapid is the one market in which the angle chart more inclination green line alligator. The next moment for the emergence of the fifth bar is green or red zone. As stated above, the number of bars in the area rarely exceeds six. And of course when the signal input in the opposite direction should be to close open positions. Point is to exit and divergence. If the chart has a new high or low, and the AO it is not present, then this is an indirect sign of the end of the trend.
At the end of the article should be noted that in the Williams to start trading to wait for a signal from fractals. Before this signal all the rest do not count. But after the entry into the market for all the fractal dimension and other signals operate in a random order. For each measurement signal from any trader can build up a position. As a result, for small movements of the total profit on the deals will be an impressive size.
