Chaos Trading System

Thanks a lot Tommy !
This really helps !

I love clear exit signals like that.

I'll study that carefully... I'm still waiting for the book to come !
S.

Starkovsky,

I took your USDCAD chart and put in the entries that Williams would take, now, to show you how much earlier you could get into the trade.

I put an arrow pointing to the Bullish Divergent Bar. Your first entry, at "1." on the chart, would have been one tick above that bar.

The second entry was a fractal entry where the fractal formed below red line, but was triggered above it.

The third entry was after three green AO bars.

Again, these newer methods will help you get into positions much, much earlier than the original Trading Chaos method.

Good luck.

Edit---

Oops, I realized that I put the line for entry #3 (three green AO bars) in the wrong spot. I'll correct it....

Thank you very much Tommy !

Regarding the exits, are you closing the trade on an opposite signal ?
ie, if you are long, close on a bearish DB ?

Thx

J.

Well, in keeping with his own philosophy of "wanting what the market wants", Williams either uses a close on an opposite divergent bar signal, or a close on the other side of the purple line. This allows him to stay in the trade as long as possible, and to catch the new move as soon as possible.

Having said that, nothing is perfect. The trading chaos method is very effective, and a huge money maker in a trending market (as nearly any trading system is). It's the choppy, trendless markets that wreak havoc on most systems.

Thank you Tommy, this makes sens...

I will continue to work and learn !
S.

Wow... can't believe it's been so long since I posted on the factory.. must have been busy or something .
Anyway, just thought that I would put up a chart showing some recent Chaos entries as per Bill Williams that could have been taken (no, I didn't catch them all).

Hello,

I noticed in different discussion about divergent bars that the angle between price and aligator is important...

do you guys have some tips and tricks on that topic ?

Thank you very much

S.

The previous bar (see attached chart) was also a zone trade and it looks like the current bar may also turn out to be a zone trade if it closes as a down bar in the next 6 hours or so. (my broker time).

Just a comment about divergence bars and angulation. According to Williams (if I understand him correctly), angulation lines are drawn from a price bar within the Alligators mouth following price highs/lows to the divergent bar and another line is drawn along the slope of the mouth (blue & red line). If there is a good angle between the two lines then there is valid angulation. Personally, I find this to be somewhat subjective and am not a great fan of this particular technique. From simple observation, it seems to me, to work best when a divergence bar prints at the end of a longer trend leg (impulse wave - maybe elliot wave 5?) than when a divergence bar prints after a short trend leg (elliot wave 1?). I suppose this is just one of the uncertainties of countertrend trading that we have to contend with.

Thanks for the thread Starskovsky. Since coming across it today, you tempted me to start posting again and that started a bit of reminescence. Came across some old notes to myself when I first started to investigate the Bill Williams approach. I have attached the first little bit. It's kind of funny reading ones old writing but I am pleasantly surprised that most of it still holds true for me. As always, I can only speak for myself and hope others can enjoy.

Well, that's it for me for the evening, hope your all catching that nice move (zone trade) we are having at the moment.

FxHermit,

Thank you very much. I'm happy if this thread tempted you to post again.
I really love this trading approach and stated this threat to clarify my mind and hopping to share with others what I'm considering as a good system !

I received the 2nd ed. book today, I will have to read it and then will share what I understand.

All the best !

S.

Hello,

Yesterday night I received the Trading Chaos 2nd ed. and I read quickly the DB bar entry conditions.

This morning, very proud of my new knowledge, I saw this trade entry on euro 4H.

Any comment ?

Hi Starskovsky

Thank you for this thread, I'm a big fun of Chaos.

I'm attaching a PDF that may be can help. I'll post some trades tomorrow.

I don't want to put a fly in the ointment but.....

The divergent bar in the 4hour timeframe seems to me to be a bit to soon after a breakout (see chart). I personally would be hesitant to trade it as it could easily prove to be a first retest of the breakout and consequently be a bit of a shallow countertrend trade. That could make it a bit of a nail biter. However, I could just as well be wrong. My wife says that I am on occasion .

I see Chaos trading as a trend trading approach therefore my favourite part of the strategy is Zone trading because it is when we see the actual impulse wave under development. In my humble opinion that is where the money is to be made. So, I tend to go very light on the countertrend trades and prefer to let them prove themselves before getting on board. The real ones usually give you plenty of time to do so.

I have taken the liberty of attaching some of my previous thoughts on the matter and I think that for the most part they still ring true for me.

Thank you very much for the pdf !

And Fxhermit it seems you are right for the DB on euro...

Today I mainly read the book and took a nice 125 pips on usd/cad 30m on a fractal breakout.

I also developed an indicator for Ninja, showing the DB bullish and bearish. Need to test it and refine a bit.

I'll continue tomorrow...

S.

Great stuff Starskovsky we do have to thank Bull for the PDF.... thanks Bull!

Yeah those divergence bars can get a bit tricky especially as one moves into lower timeframes. There they can appear more often and not always in the right place - well they are always in the right place as far as the market is concerned - just nor right for us.

Anyway, since I was talking about zone trades in the last post I thought that a couple of charts might clarify why I like them so much. I won't say to much because I think that they are kind of self explanitory. The markets that we are having lately have just been superb for this kind of trading. On the Daily timeframe we are currently 3 bars into the Zone and by the looks of it still going strong.... for how long is anyones guess. Luckily with the Chaos approach we don't have to guess.

P.S. I found some notes that are a sort of complete rambling about my thoughts when I first started to look at the Bill Williams materials. They are a bit disjointed. I will try to clean them up a bit and maybe post them at some later date. Just for the hay of it, eh?

Hello Fx Hermit,

Can you explain the conditions to enter a zone trade ? And how do you exit ? Please.

I read about zone trade trade in New trading dimensions and it's interesting because with the zone, the trend seems kind of confirmed.

Thank you very much.

S.

...is this a zone setup (GU)?

Hello Bull,

I read your pdf and it is a really good one !

But, I have a question :

It is said :


I checked with the book and yes it says that Bullish DB must appear on a red AO, but nothing about the position of the bar, nothing about being below 0 (opposite for bearish DB).

Where does this rule come from ? Maybe can you tell us more ?
Thank you very much for your help !
S.

Hello ChowClown,

Has far as I understood the zone trade, yes, this looks like a valid one. We have the 3rd consecutive bar, same color on the AO and AC...
The red zone start after 2 consecutive bars.
S.

Yes this pdf is a very good and complete (aside of pink/purple stop line) presentation of the system. And much better structured than the book.

The AO position rule regarding DBars is not mentioned explicitly in the book. But it is not a rule, its just the natural definition and outcome of the angulation of a Dbar: you can`t have a bearish Dbar below the alligator or a bullish one above the alligator. By this -and the angulation rules- these "additional" rules are just a clarification of the obvious.

Regards

Forex37