Effective trading according to the method of Bill Williams
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    Effective trading according to the method of Bill Williams
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    Bill Williams is a world famous trader, developer of analytical indicators and creator of the Profitunity strategy . In 1987, his first works on trading in the stock market were published. Even then, the author severely criticized the usual methods of chart analysis. In his opinion, fundamental and technical analytics are deprived of objectivity. Williams was convinced that a complex of random factors has a key influence on the pricing of a financial instrument.

    The trading strategy of Bill Williams is based on easy handling of money and a calm technological mindset. His tools "Alligator Principle", "Fractal Indicator", "Three Wise Men" gained great fame.

    The most popular book "Chaos Theory" was written in 1995 after the era of online trading began. In it, the author describes how he uses fractal geometry for technical analysis. At the same time, the technique is very simple and the trader needs only a few minutes to assess the situation. The book will teach every reader to define fractals and model non-linear structures. And it will be enough to remove everything unnecessary from the schedule so as not to divert trader attention to it. It may sound ridiculous, but it really works!

    The market, according to Bill Williams, is actually very simple. In essence, the market is the sum of the opinions of all investors. Traders trade on different timeframes, use different goals: it is important for someone to make a profit, and someone just hedges risks. In the case of forex, it may be a simple need for a currency. And all these players see a different picture of the market, which forms separate movements, trends, etc.

    If trader remove the timeframe display from the chart, trader are unlikely to guess what time period this chart belongs to. Our perception of reality is very relative and depends on what point of view trader are currently using. One of the author's conclusions is that all trends in the market change direction accompanied by a higher fractal number than the bars leading to a trend change. In other words, this suggests that all timeframes in the market are connected - first the trend changes on the lower timeframe, and then on the higher one.

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    A little later, the book "Trading Chaos" was published, also authored by Williams. It focuses on the principles of fractal geometry. The author convincingly proves the presence of a variable regularity in the chaos of financial markets. The high popularity of this work was due not so much to innovative methods of analyzing quotes as to the outstanding financial results of the author's trading. For 2 years of work in the stock market, Bill Williams managed to increase his capital from 10,000 to 200,000 USD. Of course, this interested traders and many decided to implement Williams' trading approach into their own practice. This prompted the author himself to open his own trading school - Profitunity Trading Group, which is currently managed by his daughter, Justine Williams. The cost of training is 6000 USD. The training course for traders at Profitunity Trading Group is aimed solely at studying and revealing the features of the unique strategy of B. Williams. By the way, similar courses are also held in the Russian Federation with a similar program costing from 1000 USD, although the organizers have nothing to do with the author of the strategy.

    Important! B. Williams indicators are included in the standard set of analytical tools of the MT4 platform , and many traders have already managed to evaluate their "effectiveness" in practice. Enthusiasts have developed new strategies that have nothing to do with the TS "Profitunity", the effectiveness of which is not difficult to question. For example, not a single review of B. Williams' strategy mentions that there are 2 methods of using fractals, but for some reason attention is focused on the less effective one. Let's see what Bill Williams' indicators really are, how the "Profitunity" strategy works, and why do "trading gurus" charge from 1000 USD?

    Bill Williams indicators and traders' mistakes

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    The original version of the Profitunity strategy uses 4 analytical tools developed by the author of the system himself:
    • Alligator.
    • Fractals.
    • awesome oscillator.

    Each indicator is integrated by developers into MT4 by default.

    Attention! The first version of the Profitunity strategy was developed in the 80s of the last century. Since that moment, the principle of pricing financial instruments has undergone significant changes. This was predominantly influenced by a significant increase in the volatility of liquid assets. The main mistake of review authors and practicing traders is that the former superficially present the basic version of the TS, while the latter unsuccessfully try to use these recommendations in trading. Initially, the Profitunity strategy was developed for the stock market. Yes, Bill Williams himself said that his method would be effective regardless of the financial instrument chosen for trading, but a lot has changed.

    To learn how to successfully apply Williams indicators in trader own trading, it is important to analyze the main mistakes of traders

    Incorrect interpretation of indicator signals



    Unfortunately, there are so many radical errors in the descriptions of the principle of operation of indicators by Bill Williams that in order to cover them all, it will be necessary to consider each tool separately:

    Fractals. A peculiar pattern consisting of a minimum of 5 candles, the Hight or Low point of the middle of which is higher / lower than the extreme ones.

    In fact, fractals display local lows and highs for insignificant periods. The only practical application of indicators, according to the descriptions on the network, is placing a pending Stop order at the fractal level. However, in accordance with the rules of technical analysis, it is possible to open an order in the direction of the trend even if the price rebounds from the local level. This principle of trading is discussed in detail in the book by B. Williams "Trading Chaos". This is how this indicator should be used.

    Alligator. The tool is based on 3 moving averages with periods of 13.8 and 5. When using the indicator in Forex trading, it is recommended to change the MA method in the settings to "Exponential". This will make the line formation more sensitive to tick price changes. When developing this tool, the author was guided by the ideas of Sidus and Puria regarding the use of moving averages in the analysis of financial markets. Without understanding this, novice traders blindly follow the recommendations presented on the network, according to which an order should be opened in the direction of the moving averages only if all lines are directed towards the current trend. The result is the following:

    The horizontal lines mark the points in the move to the market. Trader do not need to have significant experience in trading to understand the obvious thing: signals are displayed after working out the movement. Of the 3 signals presented in the screenshot, only one turned out to be profitable. That is why most traders use the alligator only as a trend indicator that acts as a filter for false signals. In fact, it is enough to make small changes to the interpretation of the signals of this instrument to make it an effective and key element in trading:

    The true signal for opening an order is the intersection of a moving line with a period of 5 of another line with a period of 8. The points for opening deals are marked in the screenshot. As trader can see, this significantly increases the efficiency of the indicator.

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    Awesome Oscillator. The possibilities of the wonderful oscillator are greatly exaggerated both by the developer and traders. This tool actually has nothing to do with the Profitunity strategy and was developed as an independent indicator. The Awesome Oscillator is effective in currency futures trading when used to detect divergences:

    The control signal for opening a position is the histogram crossing the zero line in the direction of the potential trend. It is worth saying that the Awesome Oscillator detects divergences much more efficiently than the popular MACD.

    Of all the considered indicators, the last one is especially popular, since, based on statistical studies, enthusiastic traders were able to derive several types of trading signals for this instrument:

    Zero line crossing. In practice, this signal is not effective, because it is very late.

    Formation of 3 histogram bars in a row of the same color, regardless of their location in relation to the zero level. To be convinced of the detrimental consequences of the use of such tactics in practice, it is enough to pay attention to the signals of the oscillator during periods of consolidation, which account for about 70% of the entire trading time:

    The screenshot shows a segment of the chart, on which 3 trading signals are formed. Of these, 2 turned out to be unprofitable. Such statistics do not justify the application of the strategy in practice. These signals are really effective when there is a pronounced trend, which happens quite rarely.

    As trader can see, none of the popular methods of using the Awesome Oscillator leads to the expected result. It is advisable to use this tool only when trading futures, solely to identify divergences.

    Wrong choice of timeframe



    Another common mistake of traders trying to use Bill Williams indicators in trading is choosing the wrong timeframe. The key elements in the Profitunity strategy are fractals and the Alligator. These indicators can be called trend indicators, so their use for the analysis of charts with periods M1-M30 is inappropriate. The fact is that market noise prevails on these timeframes, which prevents the correct operation of analytical tools. The optimal period for trading on Williams indicators is H4

    To open a Buy order, trader will need to wait for the following confirmations:
    • The green moving average crosses the red one from the bottom up.
    • The last fractal is directed down.

    To open a Sell order, the signals are mirrored. Stop Loss is set at the level of the last fractal. Putting take profit is not necessary, however, the value of this order can be fixed and be up to 70% of the average daily volatility of the asset chosen for trading.

    On the presented segment of the chart, 5 signals were formed to open positions. Consider each of them in more detail:
    • The deal is opened in accordance with the trading rules. The vertical line marks the entry point. The exit from the transaction is carried out after the formation of the opposite fractal. The result is a profit fixation in the amount of 240 points.
    • The upward local trend is still relevant, and the re-formation of a fractal in the appropriate direction gives grounds for placing a trade request.
    • The situation is completely similar to that considered in paragraph 2.
    • Against the backdrop of high liquidity, the Alligator displays a false signal to open a Buy order, however, the last fractal is bearish, so trader should refrain from trading.
    • If the green moving average crosses the remaining two, it indicates the need to open a Sell order, but the bullish fractal prevents trading.

    As trader can see, the complex application of the Alligator and Fractals indicators is more than effective. Fractals not only play the role of a good filter, but also display the most correct points for profit taking.
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    When the chart moves sideways, a lot of false signals are displayed, the vast majority of which effectively filter fractals. As a result, only 3 convincing signals were formed, 2 of which closed with insignificant, and 3 with good financial results.

    Attention! When trading using the Profitunity system, the risk for each order should not exceed 2-3% of the deposit. The optimal period is H4. Potential profitability is up to 20% per month, depending on the volatility of the currency pair. If it seems that this is not enough, then trader should pay attention to the yield on bank deposits or mutual funds.

    Novice traders are not recommended to trade more than 2 financial instruments.

    Conclusion


    Based on the information provided, trader can conclude that Bill Williams' indicators and the Profitunity strategy are effective. By applying them in practice, it is possible to achieve a stable profit. The main problem of most traders was the misinterpretation of trading signals.

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