Saturday, 2 April 2011

Trading Chaos

Hello! Ok I'm just gonna write some random thoughts here. So please dont judge me.

Basically I try to emulate Bill Williams Profitunity Trading System. This I believe is Trading Chaos. Chaos is not "chaos" its highly organised. Chaos is a higher form of organisation. Its not just random movements. It follows a proper structure.
(I can brag about all this because none of it is mine)
I believe the market has a structure - That structure is Elliott Wave
I believe that every structure always has a structure as well. That structure is Fractal/AIMS.
I believe every trend starts with an AIMS level and Finish at an AIMS level.

anyway, a little about the system.
We use only 3 Indicators.
1. AIMS AO (Awesome Oscillator). I have modified the four colour MACD into an Awesome Oscillator. MACD is based on EMA's where as AO is based on SMA's.

2. AIMS Levels (Fractals) Bill Williams Fractal indicator shows arrows where as AIMS displays the space between upper and lower fractals i.e. AIMS Levels.

3. Alligator - Based on Fractal Geometry Bill Williams arrived at this indicator after billions of iteration using a Super Computer.

Answer to Jim's Question.
Jim, the three lines are Bill Williams Alligator. Its based on 5,8 and 13 Smooth moving averages shifted into future/forward 3,5,8 bars respectively. The idea is to trade only when price creates narrow/shallow aims level and alligator is sleeping. Bill Williams calls this sleeping alligator with its mouth shut. He calls Green=lip Red=teeth blue =jaw. when the lines are inter twined AO close to ZL is what he calls the saddle point/ Zero Balance point, as if u have a rock at the top/peak of a mountain. slight leverage to either side will cause massive momentum. He calls blue line as that balance line at the top of the mountain. Which ever side price goes it falls down. blue is the top of the mountain. Everything is Energy and energy follows the path of least resistance. path of lease resistance is away from alligator. Price going away from alligator means price going away from balance line , it means price rolling down a mountain, following the path of least resistance. when AO peaks that means the rock hit the bottom or a hurdle and now it has to travel up the mountain, which is obviously going to require more energy consumption as compared to going down, and when it builds that kinetic energy it may drop again following the path of least resistance.

For further information you can see the following
There is a good thread on Forex Factor about Trading Chaos Click Here




I found this explaination of Bill Williams Trading Philosophy  very easy to understand and brief.Its by Alpari.
Here is the Link





If you'd like to read the books I can send them to you. I have electronic copy of First book. But really Its money woth spending. Buy all three and read one by one. Let it take you 3 months to finish all three.