Chaos Trading System

Nice fxhermit, I can see on your chart that my wavecount shouldn't be all too wrong. Seems we are in a zone with a lot of s/r points - for the waves that means wave 1 is finishing right now and today, from now we are going into wave 2 ...

Yes Slight, I think that there may be some potential in corollating S/R levels with wave beginings and endings especially around those areas where former support is likely to become new resistance and vis versa. Something like we have just seen around the 1.3025 area. It is something that I certainly plan to pay more attention to in the future.

Meanwhile, as the week draws to a close, I see that the downward bias of yesterday was at least temporarily satisfied overnight (as price moved away from that 1.3025 resistance area and triggered the fractal). The 'Gator gorging an additional hundred pips plus. A full retest of the breakout makes me wonder if we are actually in for a bit more of a corrective phase following this kind of "dirty breakout". Will 1.3025 once again become resistance or.....? Only time will tell, eh?

Couldn't resist posting a few more examples of how, in a down trend, old support once broken becomes new resistance and the birthplace of a new impulse wave. Certainly turned out to be high probability trades. Now if we can successfully transpose this thinking to the "hard right" edge............

Hi fxhermit

love the your posts and analysis.keep it up bro.I m too new to the chaos trading system and I must say I m hook especially the methodology you guys used.Hope to learn more from this.

What is your thought on the gator indicator? If you dont mind me asking.

Thanks for the additional charts fxhermit. I checked some of the pairs I am looking at and how the whole s/r relation falls into place. It's really an awesome tool to know where to pull stops to or not. Now I just gotta figure out how reliable which s/r points are and what that has to do with the waves.. I have Robert Miners "Dynamic Trading" here which I am going to study some time - maybe I can incorporate some Fibrelations into that too ...

Hello everyone
First I apologize for my bad English.
I am new here, but it keeps track of your writing and the first that you want to boast, because you are trying and help each other and especially the people who are new. I am only 20 days began to teach Bill William's Chaos Theory, so far I have used other strategies. On the forex I'm 10 months and I trade live by a little exercise demo. I want you to show otherwise my practice these days with fractals and from tomorrow begin live and I think that this is always a great strategy for us, especially beginners in Forex. Suppose I am waiting for a growing trend, and when I get the top trends and the next candle on the right side starts to fall I will wait another of candle to open down and go to sell and take about 10 pips, just do it same thing when the trend is down to just wait the other on the right side of the fractal starts to grow, (I wait about 3 pips) and enter the bay, take 5-15 pips and exits. When you take 50 pips stop trade for that day. I have a Money Management Plan
that each day take only 50 pips but constantly increasing value to the first month of your income (50 pips = 50 euros) but it gradually increases so that after 5 months is
(50 pips EUR = 2500) I think that is our brain so fresh that day took 50 pips.
Finally you can tray this demo, it does not cost anythyng.

I forgot to say stop loss is if it go in opposite direction and Break the Last Fractal.Here is one example for trade. I use 15 min and 30 min charts.

Hi Nimrod,

Glad that you are liking the methodology. Be sure to read all three of William's books if you get the opportunity.

As for the Gator Oscillator, William's writes about it in his first book, Trading Chaos 1 but doesn't come back to it in his later books. I think that he probably decided to drop it along the way (he does that with a few other things too).

As for myself, I am not knowledgable in its use so I can't really make any comment other than that it is a graphic (histogram) way of describing the Alligator. I am used to looking at the Alligator itself and don't find that the Gator Osc. gives me any greater clarity. However, if it gives you some clarity, then by all means, why not use it - there really are no hard and fast rules in Forex. It's whatever works - go for it. If you discover any cool insights into it's use, I'm sure that we would love to hear about them.

Yes, it is some interesting stuff, isn't it? I whole heartedly agree with you that we "gotta figure out how reliable which s/r points are and what that has to do with the waves".

As far as the reliability of the s/r points is concerned I am pretty well convinced that there is a high level of reliability to them. I think that it is so almost just by definition alone. Saying S/R is the same as saying Fractals. I like what Williams says in NTD on p. 43 that "Fractals are the way the markets organize themselves". They are both the beginning and ending phenomena of waves. I think that is why he gives them the importance of being one of his first trading signals. So I have no doubts about their reliability, hence my interest in drawing those silly lines on the chart.

As to which ones are of greater importance, well, that's literally the million dollar question. I think that the whole thing hinges on clarifying the nesting of waves within waves to what ever degree is practical for the trader. I am thinking that the best way to do this is may be to use multiple timeframes. Starting with the longer timeframes and moving down into the lower timeframes. The fractals in each time frame should reveal the pertinant s/r for that timeframe. Carrying that down to the next lower frame should give an idea of not only where price has come from but where price is likely to be going. This can then be repeated for the next lower timeframe and so on. Of course, one has to be practical and realize that wave structure repeats itself into infinity so beyond a certain point it becomes laborious to try and follow waves within waves within waves within waves...........

I generally work within a grouping of three. I suppose any grouping of three would work but personally I use 1 day, 4hr and 1 hr timeframes for drawing the lines. Any more than that and the charts just become too cluttered with lines. All that I am really looking for are "heads up" areas in the landscape. I am not particularly concerned with the actual numbered wave count but it is nice to know whether price is moving into an impulse wave or corrective wave and of what degree. The s/r lines and angled trendlines help with that, so does the Alligator by indicating whether it is feeding, sleeping or digesting. (every impulse is followed by a corrective and vis versa).

I don't mind complexity but I'm always wanting to reduce it to simplicity of application when it comes down to the actual trading. I am quite willing to let the Alligator, AO, initiating fractal, etc. call the shots once I have identified the "heads up" areas. Anyway that's just some of my theory and approach to trading this thing called chaos.

Hi bro,
thanks for the feedback.I too cant seem to find any significant on the gator indicator.I have been using the alligator system and until this day I really cant put a finger as to what is the gator for.I have not seen many posts that include the gator.I ll just put it aside for now.
I m getting other Bill William book "New Trading Dimension" and hopefully get some knowledge from it.Cant wait to get it.

And to all chaoticans in this thread, please keep contributing cos we do appreciate your input on the subject matter.Thanks guys.

Nim the newbe alligator.

There is an overview of Williams Chaos theory posted here:

http://www.alpari.co.uk/en/market-an...ory/index.html

Hope I'm not breaking any rules by posting this link .

P.S. Nimrod, it explains a bit about the Gator Osc.

Since this is the start of a new week I thought that I would post a chart of my recent s/r fractal based trendlines. The 4 hr is my main window, straddled by the daily and 1 hr so that is what I've posted. The way that I see it is that we are currently in a somewhat choppy (flat) corrective wave with a downside bias. Let's follow along and see what happens.

P.S Maybe Starskovsky and/or Slight can give us an updated wave count? Just wondering what the probability might be for a trend changing impulse wave?

Here is an updated wavecount, but I only counted until the 1h chart, which means that it could make a new low, for some w5 of w5 of w5 of w5 .. but I am not going down so far in TF, because I've found it to be better to take reversal signals on the 4h or daily TF, which we see in this case is a divergent bar on the daily TF.
So the important parts of this chart are exactly where you put in your s/r lines.
Wavecount pretty much says, that we saw the end of a wave 5, of a wave 1, of a wave c. Meaning we are going into a wave 2 of c, which might be not more than a boring sidemove. I am definitely ready to short this pair after we've seen some kind of correction for a couple of days .. or 1-2 weeks (this I would do so far below the last meaningful 4h fractal or below the daily divergent bar.)

Ahhh... good old fractal support and resistance, either it holds or it breaks, both of which offer trading opportunities. Watch the Alligator, take the initiating fractal. The AO helps out too (divergence).

P.S. Thanks, Slight for the wave count, very informative and predictive.

.. and it seemed to be correct too. Check the current analysis on the 4h chart - the lines I drew are just one possibility of how this w2 might unfold.
You'll see again how the waves and s/r are working perfectly together.

I have a question regarding s/r, fxhermit. On my chart you see 2 circles, a bigger and a smaller one. My question is, can the fractal at the bigger circle be considered a new s/r point, or is this not a strong area (yet?) and we would have to look for the s/r at the fractal of the smaller circle?

Very astute observation, Slight. Here is my thinking on it. Although fractal s/r lines tend to make the s/r look like definitive points, I think it is always best to treat them as areas or zones rather than distinct points ( although, uncannily they do often hold true almost to the pip). So at this time, I would treat your small circle as the more important s/r that would have to be violated. However, by the time we get to wave C, as marked on your chart, the Alligator, AO, etc. combined with a more recent fractal at that time may well give us an earlier entry that may then carry on through that support. I guess, time will tell.

Alright, nice illustrations - that cleared things up, thanks!

O.K. glad that was helpfull.

If I remember my market "jargon" correctly, when one s/r point gives way and then makes a second s/r point creating an s/r zone, some traders call that "throw over". There is also "throw under" when price does not quite reach previous s/r. Then, I suppose there is also "throw up" when the trade goes against you .

Hahah I'll pay attention to it before I "throw up" on my computer and can't as a result not take off the losing position