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Profitunity (Chaos) Trading System by Bill Williams

  • #241
  • Jun 26, 2007 1:37pm Jun 26, 2007 1:37pm
OK Dale I'll try to answer 2nd post 1st.
Quoting fintrans
I have started to notice (since last Friday anyway) that the moment a stop order of mine is hit the price almost always immediately retracts and of course you are now in a loss situation.
First of all we have to keep in mind that this is a trend system. That means that it is not designed for range trades, i.e. when bars are inside or close around the Alligator.

On the other hand don't take literaly "... put a stop order one tick abobe/below the bar's high/low..." - this push you into situation you;ve described - loosing - especially where price is close aroung lines.

This is not a scalping system - that means you cannot use all the time tight stops because they are aften hit by the volatility.

The question "Where to place stops?" though important, does not have a simple answer - depends on your account, style of trading, pain of loosing, etc.
  • #242
  • Jun 26, 2007 1:55pm Jun 26, 2007 1:55pm
Hi folks,

For what it's worth - a word:

There seems to be a HUGE difference between the original Profitunity (Chaos) Trading System and the one contained in the second edition of the book. Having only covered the first two or three chapters relating to the system in the past hour or so it is very clear that the original system used the fractals as entry points whereas the system detailed in the second edition of the book uses bullish/bearish divergent bars for entry signals.

Why this makes such a difference is if you read back on my earlier posts today I was finding two things happening:

1 - Once my buy or stop orders were hit the price would almost immediately retrace (which logically, now that I think about it, is quite correct because the fractals actually represent points of resistance so if your order is hit just a few points or pips too early you are actually buying or selling at a point of resistance).

2 - I was also very concerned about the fact that it would appear that a lot of the time you would be missing out on huge rallys.

Basically, the way I read it, in the second edition the fractals are used to add to positions already opened and not for initial entry.

isto: Comments on this?

Edit: Sorry isto - I did not see your reply above when posting this message. What do you think of my observations though?

Regards,

Dale.
  • #243
  • Jun 26, 2007 2:28pm Jun 26, 2007 2:28pm
Hi Dale,

Quoting fintrans
This morning I placed a sell stop order for USD/NOK on the 4 hour chart.

I always use the value of the Alligator's lip for my stop loss.

The order that I placed this morning was triggered and the price immediately retracted until eventually my stop was hit.
In the next two post I'll send my point of view about your charts (post #236).

Please all readers to note that this is just a point of view and I do not pretend to be the only True.

I'd like to underline also that commenting a history chart is completely different than taking a trading decision on the moment signal comes...

I doublt there is a trader at all that didn't face the question:
"How could I miss this obvious signal?!?"

My belief is that the trader must accept error decisions and must know how to act before enter a trade

So let's see the H4 chart.

We have a Bearish fractal that has not been taken until a new Bearish fractal has been formed.

For me this is suspitious showing me that Bulls have enough power to push Bears up and this is sipported by the Momentum wich quickly goes up and crosses the zero line while price is drifting around these fractals...
... and finally enters into the Alligator's lines.

So all short trades have to be closed and / or short stops - to be canceled.
Attached Image
  • #244
  • Jun 26, 2007 2:28pm Jun 26, 2007 2:28pm
This post is devoted to D1 chart for the situation discussed in the previous post:

Here the nice long decline ended into a Bearish fractal forming also a nice Bulish Divergent Bar.

Again: short orders should be closed and expect to go long if DBars is confirmed...
Attached Image
  • #245
  • Jun 27, 2007 1:55am Jun 27, 2007 1:55am
Continuing the provious posts here is another sample shonwing that it is time to close all long orders and to avoid either short or long etries
Attached Image
  • #246
  • Jun 27, 2007 2:05am Jun 27, 2007 2:05am
I hope you'll see the difference between this chart and the chart in the previous post.

Here we have entry into Alligator's Lines but it is supported by Bearish Divergent Bar, strong down Momentum.

First Bearish fractal at the time it has been taken was below red line; down move has been retested and confirmed by forming a new Bullish fractal (2nd one) which is stil not taken...

Let's look what will happen next
Attached Image
  • #247
  • Jun 28, 2007 2:08am Jun 28, 2007 2:08am
Here is a nice setup triggered during night and offerign a new opportunity for a long entry...

Bullish Divergent Bar has been triggered.
Acceleration and Momentum support up move (currently retracing) and a new long entry around 16560 is forming...

Good luck
Attached Image
  • #248
  • Jun 28, 2007 3:05am Jun 28, 2007 3:05am
Hey isto - how is it going?

I REALLY need some input on what you are doing as far as stops and TP is concerned - this system is starting to kill me now!

Basically - whenever a buy or sell stop is triggered it almost ALWAYS turns into an immediate profit (when using the divergent bar for entry) BUT then, invariably, starts turning into a loss until it gets stopped out. It's now starting to eat it's way through my capital and I just can't see what I'm doing wrong here and I do not want to change systems as I do believe that this one works (based on historical data anyway).

Also - there is nothing mentioned in the book about what happens in the following case:

A bearish divergent bar appears
You place a sell stop one (or a few ticks) below the low of the bar
The sell stop gets triggered
You place a stop loss one (or a few ticks) above the signal bar
You place a buy stop order one (or a few ticks) above the signal bar (same price as the stop loss)

So far - so good

The market goes down in your favour (making a small profit)
The next bar opens and the market starts going against you
Your stop loss and buy stop detailed above get triggered (now a loss on the above position) (by this time a buy fractal has appeared and has just been triggered as well)
Where do you place the stop loss for this newly opened position?

It would appear that in a trending market this works fantastically BUT in a range bound market this thing will finish you off.

BUT, having said that, I am following the system to the letter as detailed in the book and the book specifically says that it should work in any market, any timeframe, and any instrument!

How do YOU determine whether the market is trending or range bound?

Also - it is designed to take things like commentary and market sentiment out of the equation i.e. mechanical trading.

What seems to be becoming clear (unless you can throw some more light on the subject) that this system will set you up to take small loss after small loss after small loss UNTIL a trend starts to develop and you just have to hope that the ensuing trend makes up for all of these small losses when it comes. Would that be a reasonable assumption?

I have tried to contract the Profitunity Website for traders of this system but they are closed (should open today though).

Any ideas or thoughts?

Regards,

Dale.
  • #249
  • Jun 28, 2007 3:11am Jun 28, 2007 3:11am
Sorry - another question - does not seem to be covered in the book:

What if, in the situation described above, while you are in a trade and your stop has not been hit yet, a bullish divergent bar appears? Do you act on this bar as well?

Actually that's another good question: The examples in the book are always sort of 'ideal' situations and another thing that is not explained is the following:

Do you only take bearish divergent bars if they are above the alligator and do you only take bullish divergent bars if they are below the alligator?

In all of the examples in the book this appears to be the case but I'm not sure if this is just for illustration purposes or if this is actually the case.

Regards,

Dale.
  • #250
  • Jun 28, 2007 4:46am Jun 28, 2007 4:46am
hi isto.

i'm steel reading bill book , every page i read i understand how why other love this system i'm really enjoy this reading.

i want to ask about some indicators that i saw on your chart that i don't have on my metatrader.

can you please xplain what the use?



Quoting isto
Here is a nice setup triggered during night and offerign a new opportunity for a long entry...

Bullish Divergent Bar has been triggered.
Acceleration and Momentum support up move (currently retracing) and a new long entry around 16560 is forming...

Good luck
Attached Image
  • #251
  • Jun 28, 2007 6:01am Jun 28, 2007 6:01am
Quoting 400396
hi isto.

i'm steel reading bill book , every page i read i understand how why other love this system i'm really enjoy this reading.

i want to ask about some indicators that i saw on your chart that i don't have on my metatrader.

can you please xplain what the use?
These are just allerts I've made to let me know that something happend on the market. Thay do not exists on MT4...
  • #252
  • Jun 28, 2007 6:30am Jun 28, 2007 6:30am
Hi Dale

Hard questions you're asking... :surprised
Let's try:
Quoting fintrans
...what you are doing as far as stops and TP is concerned...
Unfortunately there is no answer like "Put your stop loss here."

Generally there are 3 hard to decide delemas on trade

  1. when to enter
  2. when/where to stop
  3. when/where to take profit


Answers of these question depends: on market; on pair; on broker; on your account; on your trading style... Everyone could continue this list.

Let's try a sample - one of the brokers I use has 1 pip spread for EURUSD and 15 for GBPCAD. It is obvious that I cannot use the same distance stop-loss on both, can I?

Another broker has 3 pips spread generaly but during news time spread becomes 25 pips sometimes, so choosing a stop loss here will depend not on pair but on time.

Other situations also exists, but I hope you've got the point

Quoting fintrans
Basically - whenever a buy or sell stop is triggered it almost ALWAYS turns into an immediate profit
I do not see a reason to avoid a new entry as a workaround ...

Quoting fintrans
...there is nothing mentioned in the book about what happens in the following case...
If you think about you'll agree that it is not possible to cover all situations that live trade offers.

This is only the system. As anything else in the world it has good and bad part.

This best advantage of this particular system is that it is clear and clarifies what happens on the market not caring why this happens... It is just a style of trade and Bill is kind enough to share it with us.

Somewhere is his books he said:
... each trader trades his own believes ...[and] ... this is why even if one is trading side by side the very same method with very same rules the result will differ.

I quote this by hart and the words might be different but you get the point, don't you?

Quoting fintrans
It would appear that in a trending market this works fantastically BUT in a range bound market this thing will finish you off.
Yes this is right in the center of 10! This is why he has written Trading Chaos 2nd Edition offering Divergetn Bar as alternative tool for ranging market.

Quoting fintrans
How do YOU determine whether the market is
trending or range bound?
I personally use Alligato and Gator (available in MT4)
Quoting fintrans
Also - it is designed to take things like commentary and market sentiment out of the equation i.e. mechanical trading.
I do not believe in mechanical trading - market is live thanks to the traders - if mechanical trading is at all possible that meand that exchanges will become a large robot factory and profit will disapear...

Quoting fintrans
What seems to be becoming clear (unless you can throw some more light on the subject) that this system will set you up to take small loss after small loss after small loss UNTIL a trend starts to develop and you just have to hope that the ensuing trend makes up for all of these small losses when it comes. Would that be a reasonable assumption?
There is no one single trader without a loss. You'll face losses, small or large. It doesn't matter how many they are - important is to keep them smaller than your profit - obvious, isn't it?
  • #253
  • Jun 28, 2007 6:44am Jun 28, 2007 6:44am
Quoting fintrans
What if, in the situation described above, while you are in a trade and your stop has not been hit yet, a bullish divergent bar appears? Do you act on this bar as well?
Each trade is unique... Situation on the market is also... So as I've said - it depends on lot's of things - one of them is experience and it comes with practice, practice, practice, practice, ....

Quoting fintrans
Actually that's another good question: The examples in the book are always sort of 'ideal' situations and another thing that is not explained is the following:
Think about - would be better if when you look on the sample you start wondering "which one is that fractal? this bar?, No,No - that one!, Am I sure? may be the last bar or it will appear on the next new bar???" or
"place order where distance is exactly 3 pips, but here put your order only if you have 6 pips, but there you'll need 10 or 15 pips"...

The aims of the books are to show you the core of the system and of caurse there should be some samples that must be clear enough to understand descriptions.

He did this brilliantly and in an easy to understand way - this is wht he has so much fens.

You cannot expect that when you finish reading you'll start trading like a Pro.

Everyone needs learn, practice, analyse, think, correct and begin from the beginning...

Sorry for this long postings... I did them because I hope they will clear somehow this system...
  • #254
  • Jun 28, 2007 8:42am Jun 28, 2007 8:42am

hi guys, mabye we got a programer here that can help us to print the bars like bill said in is book
"

Set up your computer so that (1) when both the AO and the AC are higher than their immedi- ately preceding bars, the corresponding price bar will be colored green, and (2) if both the AO and the AC are lower than their immediately preceding bars, the corresponding price bar will be colored red. If the AO and the AC are different colors, set up the price bar to be gray. You can then read the zone color directly on the price bar.
"
  • #255
  • Jun 28, 2007 8:58am Jun 28, 2007 8:58am
Hello isto - and thanks for replying to each and every one of my questions.

I did manage to find in the book (second edition) an exit strategy (that is not working for me but it's there anyway):

Basically when a new signal appears in the opposite direction i.e. when you are long and a bearish divergent bar appears you stop and reverse and visa versa for a short position.

Something else that has come to mind:

I noticed the post looking for a programmer that could program the stuff for AO and AC. My question is this: which edition of the book or system are you using? I have just received the second edition and I can tell you that nowhere is AC used at all. Does anyone know (isto) if this was a change to the system by Sir Bill or are the methods used in the second edition supposed to be used in conjunction with the first edition? Which edition / version do you have / are you working with (isto)?

Regards,

Dale.
  • #256
  • Jun 28, 2007 9:09am Jun 28, 2007 9:09am
Quoting 400396

hi guys, mabye we got a programer here that can help us to print the bars like bill said in is book
"

Set up your computer so that (1) when both the AO and the AC are higher than their immedi- ately preceding bars, the corresponding price bar will be colored green, and (2) if both the AO and the AC are lower than their immediately preceding bars, the corresponding price bar will be colored red. If the AO and the AC are different colors, set up the price bar to be gray. You can then read the zone color directly on the price bar.
"


If you search google I think you'l find such an expert - I had found somewhere but do not keep a copy of it - it does colored bar in this fasion but...

you could use AO and AC - when both are grean - you have green bar; when both are red - you have red bar and when one is red and the other green you have gray bar.

Speaking other words these are Zones...

As I said before coloring itself do not help if you do not understand the system...

You can also seatch at metaquotes.net - there is some experts posted there...
  • #257
  • Jun 28, 2007 9:21am Jun 28, 2007 9:21am
Quoting fintrans
Basically when a new signal appears in the opposite direction i.e. when you are long and a bearish divergent bar appears you stop and reverse and visa versa for a short position.
Well, I could answer for myself:
I decide whether to reverse or not on each trade - I do not have rule for that...

I'm sorry for this vague answer, I wish I have all of them ...

Quoting fintrans
which edition of the book or system are you using?
Trading Chaos 2nd. but I have all the books...

Quoting fintrans
I can tell you that nowhere is AC used at all.
Yes you've noted this correctly.

Quoting fintrans
Does anyone know (isto) if this was a change to the system by Sir Bill or are the methods used in the second edition supposed to be used in conjunction with the first edition?
No I do not know (and francly I do not care). I look at his books as consecutive volumes of this system. For me it does not make sense in the next book to repeat everything from previous one ...

My point of view is that next book develops further the system. Otherwise he certainly would emphasize that this is a new system...
  • #258
  • Jun 28, 2007 4:59pm Jun 28, 2007 4:59pm
i found the "trade in the zone indicator"
Attached File(s)
File Type: mq4 zone trading.mq4   3 KB | 1,159 downloads
  • #259
  • Jun 29, 2007 3:22am Jun 29, 2007 3:22am
So far we have 207 pips move in the price
and 797 pips in 6 orders in this trade.

Chart and descriptions are available here
Attached Image
  • #260
  • Jun 29, 2007 3:34am Jun 29, 2007 3:34am
Here you could see something similer for GBPCAD.

Again profit in pips is few times more than the market moves.
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