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Profitunity (Chaos) Trading System by Bill Williams

  • #161
  • Jun 8, 2007 7:30am Jun 8, 2007 7:30am
Quoting fintrans
buy fractal was pointing down.
Hello Dale

I'll try to explain in few posts so as sharts to be visible

1. Up (Bulish) Fracktal is always up and Down (bearish) - always down
2. we count bars always from right to left
3. on up fractal we have up move and correction of at leat 2 bars - during this two bars we put our buy stop above fractal bar

I hope the picture below will clear the points
Attached Image
  • #162
  • Jun 8, 2007 7:38am Jun 8, 2007 7:38am
Here's my point of view about trading your chart. Hope it is clear.

If you have question - ask.
Attached Image (click to enlarge)
Click to Enlarge Name: Fractals Graphic Query.JPG Size: 107 KB
  • #163
  • Jun 8, 2007 7:45am Jun 8, 2007 7:45am
Hi - and thanks for the (very quick) reply.

I am MORE confused though (sorry - I don't know why this is so difficult for me to understand)!

In your first message you say:

Quote
1. Up (Bulish) Fracktal is always up and Down (bearish) - always down

but on the chart on that same message you seem to be saying the opposite. Is this a mistake?

Also - from what you are telling me would you say that my chart manual is also wrong i.e. my example that comes from the chart manual?

Sorry - I'm battling with this!

Regards,

Dale.
  • #164
  • Jun 8, 2007 7:52am Jun 8, 2007 7:52am
I know I'm probably typing over you with this but I had a look at your take on the graph that I posetd (thanks for going to the trouble with all of the markup).

I'm also confused about the timing. The way I have read it and the way I have been observing these fractals they are only drawn if there is two bars on either side of them SO if I take another look at your marked up chart then by placing a short stop where you have marked it in green that stop would never get hit because that fractal was only drawn after two bars have closed to the right of it and look where that candle opened.

Like I said - I'm probably not getting this.

Regards,

Dale.
  • #165
  • Jun 8, 2007 8:15am Jun 8, 2007 8:15am
Quoting fintrans
... but on the chart on that same message you seem to be saying the opposite. Is this a mistake?

Also - from what you are telling me would you say that my chart manual is also wrong i.e. my example that comes from the chart manual?
2nd - 1st: Read the books (if possible) - not manuals. I do not know the manual. what is drawn on the chart is correct.

then 1st: no mistake. It seems to me that you turn the signals upside down somehow.

Here is an attempt to explain fractal.

Bars 1 through 5 are creating fractal on bar 3 which has higher high than the preceeding two bars (1 & 2), right?
Bars 4 and 5 have lower highs that bar 3 and this is the condition - at least 5 bars where we have a bar with a higher high than the others and we have two lower highs on both side of fractal bar - this is for bullish fractal.

So on the drawing below you have a bulish fractal on bar 3, right?

let say the high price is 1.2345 so you entry point is 1 tick above, i.e. you put buy stop order on 1.2346.

Actual long side entry is on bar 8 because bars between 3 and 8 have lower high than fractal bar (#3) and bar 8 has reach a price higher than our fractal (1.2345).

Hope I've written all this clear enough

If you need - ask
Attached Image
  • #166
  • Jun 8, 2007 8:29am Jun 8, 2007 8:29am
Quoting fintrans
I know I'm probably typing over you with this but I had a look at your take on the graph that I posetd (thanks for going to the trouble with all of the markup).

I'm also confused about the timing. The way I have read it and the way I have been observing these fractals they are only drawn if there is two bars on either side of them SO if I take another look at your marked up chart then by placing a short stop where you have marked it in green that stop would never get hit because that fractal was only drawn after two bars have closed to the right of it and look where that candle opened.

Like I said - I'm probably not getting this.

Regards,

Dale.
Sorry may be I did confuse you with the color I'll try another way

Chart become very colorful but I hope will be more clear
Attached Image (click to enlarge)
Click to Enlarge Name: Fractals Graphic Query.JPG Size: 116 KB
  • #167
  • Jun 8, 2007 9:00am Jun 8, 2007 9:00am
Nah - you've still got me!

OK - to put it into perspective I have attached another (live) chart.

Based on the fractals being displayed what would you be doing?

This may help me understand (the other chart like I said was just from the online help manual).

The horizontal green line by the way is the pivot point calculated from using yesterdays data where I just opened a short when it was hit based on the pivot point / line - and I don't see any new fractals appearing at this time (although it is a 15 minute chart that I am posting just for the purposes of explanation).

Are these fractals not supposed to be telling me when and where to be adding to the positions i.e. where and when would they appear?

Put it this way - if the price goes down - what will the fractals look like and what will they be telling me (assuming it goes down and down).

Regards,

Dale.
Attached Image (click to enlarge)
Click to Enlarge Name: Fractals Again.jpg Size: 58 KB
  • #168
  • Jun 8, 2007 9:21am Jun 8, 2007 9:21am
OK - now a new fractal has appeared - pointing up.

What is this telling me to do?

I know these things are supposed to be used in conjunction with AO and AC BUT for now I need to understand the most basic element WHICH IS THE FRACTALS for crying out loud!!!

Thanks for your input and help though - much appreciated!

Regards,

Dale.
Attached Image
  • #169
  • Jun 9, 2007 3:59am Jun 9, 2007 3:59am
OK - I think I've got it (finally):

If I understand this correctly:

When an up fractal appears you would place a buy stop one tick above the value of the high of the candlestick or bar to which the fractal is attached AND when a down fractal appears you would place a sell stop one tick below the value of the low of the candlestick or bar to which the fractal is attached? Correct?

If the above is correct then this system assumes the following (in sort of laymans terms):

The price will reach a high (or maximum), it will then retract for a couple of candlesticks or bars, and then (eventually) shoot through the high of the candlestick or bar that that has the up fractal attached to it and in so doing execute your buy stop (and obviously the reverse applies when the price reaches a low (or minimum)?

Is this not just pivot point trading?

And to take it one step further when a new fractal appears the preceding one is no longer valid and the associated order is cancelled and a new order is placed according to the direction of the new fractal?

OK - I am getting ahead of myself here now - and assuming that the above is correct - and - if it is - it would appear that any single one order that was placed was ever hit (based on the live chart attached - DAX 30 Daily) - correct?

I know that I am not taking into account the readings of Alligator, Gator, AO, and AC in my example and maybe that is why this looks like a system where you would be very lucky to make one trade only now and then let alone make a profit?

I understand that as well as serving as entry points the fractals are telling you whether or not it is a bullish or bearish trend but based on what I think I understand of this by the time your order is executed (if ever) in a bullish trend the bulls have all but run out of steam and the opposite in a bear market?

On the other hand - I am a great believer in anything Bill Williams or J. Welles Wilder - and I find it impossible to believe that my observations are correct.

Please help.

Regards.

Dale.
Attached Image (click to enlarge)
Click to Enlarge Name: DAX Markup.jpg Size: 85 KB
  • #170
  • Edited 5:32am Jun 9, 2007 4:58am | Edited 5:32am
Would you believe - I think 'the penny just dropped' :surprised !

It's amazing what a bit of sleep can do!

To quote:

'Fractals are valid until they are either triggered or a new fractal in the same direction appears ...'

In other words - a new fractal IN THE SAME DIRECTION invalidates the previous fractal and associated order IN THE SAME DIRECTION!

That could work!

The only problem I forsee here is if you brokerr is one of those that hunts stops (which mine regularly does). If you have that problem I would err on the side of caution and place your orders above the fractal itself NOT above the high of the candlestick or bar where the fractal is attached. That way your orders would only be executed when a genuine move occurs and not when 'spiked'. You would be getting into a trade a bit later BUT at least you would have ammunition with which to approach your broker to exact a refund!

Have I got it? Do I, do I?

Edit:

Upon reading further would it be safe to assume that once an order that has been placed, based on a fractal signal, has been triggered, then subsequent fractals in the same direction may be used to add to the position as well as signals from AO and AC as they occur? In other words - you do not need to wait for a fractal signal AND confirmation from AO AND confirmation from AC to enter a trade? If you had to wait for all three indicators to be giving a signal it appear that you would wait a long time between trades?

Regards,

Dale.
  • #171
  • Jun 10, 2007 6:03am Jun 10, 2007 6:03am
Hello Dale

Sorry for this delay but I've problem with my PCs

This is the answer of post #167.

My experience shows me that the lower time frame is the most dificult to manage trades - but this is only my oppinion.

to your chart - general rule is: we take only sell signals that atr below the alligator and buy signals only above alligator.

Because we are below the lines we look only for sell signals.

Black arrows mark sell fractals - below we place sell stop orders;
Green lines are actual entry point in the market - where sell stop orders (placed below the fractals) has been executed.

That's it
Attached Image
  • #172
  • Jun 10, 2007 6:09am Jun 10, 2007 6:09am
Quoting fintrans
OK - now a new fractal has appeared - pointing up.

What is this telling me to do?

I know these things are supposed to be used in conjunction with AO and AC BUT for now I need to understand the most basic element WHICH IS THE FRACTALS for crying out loud!!!

Thanks for your input and help though - much appreciated!

Regards,

Dale.
This new fractal is too early to be a reverse. I'll look for a conformation or retrace before the up move to be confirmed.

Anyway time frames below H1 are not reliable enough and there are lots false signals...
  • #173
  • Jun 11, 2007 1:32am Jun 11, 2007 1:32am
Quoting fintrans
Would you believe - I think 'the penny just dropped' :surprised !

In other words - a new fractal IN THE SAME DIRECTION invalidates the previous fractal and associated order IN THE SAME DIRECTION!

Dale.
This does not make sense.
Fractals in same direction confirm the signal rather than to invalidate it.
We use it to add orders in trend direction.

  1. We get first fractal outside of the Alligator and enter market on the trend direction.
  2. We add on each consecutive signal after the 1st fractal is taken - i.e. price has moved above/below fractal's high/low


Quoting fintrans
...place your orders above the fractal itself NOT above the high of the candlestick or bar where the fractal is attached. That way your orders would only be executed when a genuine move occurs and not when 'spiked'. You would be getting into a trade a bit later...
how much above high or below low of the candle you'll put the order is a personal decision. You could use stop orders or you could do it manually.

If this is a trend beginning there is no problem to enter late, but this won't keep you dry from 'spikes'...

Quoting fintrans
Upon reading further would it be safe to assume that once an order that has been placed, based on a fractal signal, has been triggered, then subsequent fractals in the same direction may be used to add to the position as well as signals from AO and AC as they occur?
Yes

Here are some brief explanation that might be useful reading for you.
system itself, The Alligator reading, Fractals and also the beginning of the thread
  • #174
  • Jun 11, 2007 1:59am Jun 11, 2007 1:59am
Good morning,

Glad you're back!

As you can see I was doing a lot of reading and backtesting this weekend!

Sorry - I should have been more clear:

Quote
In other words - a new fractal IN THE SAME DIRECTION invalidates the previous fractal and associated order IN THE SAME DIRECTION!

What I meant was that this applies ONLY when opening a position. Only after the position is open / order has been triggered do you use the subsequent fractals in the same direction to add to the position BUT when opening the position only the last fractal in an up or down position is valid i.e. a new fractal in the same direction invalidates the previous fractal and order in the same direction (of course all of this taking the Alligator into account).

I'm a big fan of Parabolic SAR and (as you probably know) this indicator was specifically designed to agressively protect profits / negate losses so today I will experiment by placing my stop loss on orders at the CURRENT value of Parabolic SAR and keep adjusting the stop loss as new dots appear i.e. as if you were already in a trade. This gives a very wide margin for error AND could result in huge losses I know (especially on the 4 hour and daily charts) BUT at least you won't get whipsawed out in a hurry.

Thanks for all of your input.

Once 'the penny dropped' it was amazing and I'm glad to see I don't know more than Bill Williams!

Regards,

Dale.
  • #175
  • Jun 11, 2007 3:00am Jun 11, 2007 3:00am
Quoting fintrans
What I meant was that this applies ONLY when opening a position. Only after the position is open / order has been triggered do you use the subsequent fractals in the same direction to add to the position BUT when opening the position only the last fractal in an up or down position is valid i.e. a new fractal in the same direction invalidates the previous fractal and order in the same direction (of course all of this taking the Alligator into account).
I do not take so strict the words.

The general idea behind chaos trading system is to trade with trend and to stay in as long as possible.

Signals are only to make things clear for the trader and to asure that trader will enter on the right side of the market.

Fractals, as a signal, are place where direction changes. So once formed thay say one only thing - 'here is an edge', i.e. direction has changed. Once created it is always valid. It is only a mark.

Trades are made by us and to quote the book "we trade our believes".
  • #176
  • Jun 11, 2007 6:20pm Jun 11, 2007 6:20pm
i called dis system "penyu bertelur"..
  • #177
  • Jun 14, 2007 2:44am Jun 14, 2007 2:44am
After some hesitation about validity of Bearish Divergent Bar it turned into a profitable short trade ( look the story here and here).

Today we have a new Bearish Divergent Bar setup supported by resistance around 78.6% Fibo level. The angle is reasonable and if we are lucky enough market might offer a new profitable short trade.
Attached Image
  • #178
  • Jun 15, 2007 2:39am Jun 15, 2007 2:39am
The bellow is the trade of H4 EURUSD ended with a nice profit.

Explanations are here.

Inserted Code
[b]DateSignalPriceSLP/LP/L$lots:[/b]
07.6.2007 17:08F1.34591.33060.015315301
07.6.2007 09:34Z1.34141.33060.010810801
08.6.2007 12:13Z1.33841.33060.00787801
12.6.2007 11:21BL1.33441.33060.00383801
12.6.2007 13:18BL1.33351.33060.00292901
12.6.2007 17:09BL1.33291.33060.00232301
12.6.2007 17:09F1.33291.33060.00232301
12.6.2007 20:17F1.33191.33060.00131301

Total: [b]4 650[/b]
Attached Image
  • #179
  • Jun 15, 2007 3:29am Jun 15, 2007 3:29am
nice job.

do you trade with your own money or demo trading?
if you trade with 1 lot every time what the total capital that you use ? 10k , 20k, 50k?

keep up the good work.

Quoting isto
The bellow is the trade of H4 EURUSD ended with a nice profit.

Explanations are here.

Inserted Code
[b]Date            Signal    Price    SL    P/L    P/L$    lots:[/b]
07.6.2007 17:08        F    1.3459    1.3306    0.0153    1530    1
07.6.2007 09:34        Z    1.3414    1.3306    0.0108    1080    1
08.6.2007 12:13        Z    1.3384    1.3306    0.0078    780    1
12.6.2007 11:21        BL    1.3344    1.3306    0.0038    380    1
12.6.2007 13:18        BL    1.3335    1.3306    0.0029    290    1
12.6.2007 17:09        BL    1.3329    1.3306    0.0023    230    1
12.6.2007 17:09        F    1.3329    1.3306    0.0023    230    1
12.6.2007 20:17        F    1.3319    1.3306    0.0013    130    1
 
Total: [b]4 650[/b]
  • #180
  • Jun 15, 2007 5:32am Jun 15, 2007 5:32am
Quoting 400396
nice job.

do you trade with your own money or demo trading?
if you trade with 1 lot every time what the total capital that you use ? 10k , 20k, 50k?

keep up the good work.
I have a demo and a real account. Demo I'm using to test alterations in the system and is more friquently used

On the real I'm using less agressive methods.

There are profitable periods and losses of caurse. Both are on the positive site for last half an year...

In general it doesn't matter - the main purpose of this writting is to clear this system to interested traders and to miself too and to reduce false signals as much as possible and to "let profit runs".

Easy to say - hard to do
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