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Profitunity (Chaos) Trading System by Bill Williams

  • #1,241
  • Aug 27, 2011 4:42pm Aug 27, 2011 4:42pm
There are three books published by Williams on this trading method to this date. Each of them explain different signals along with describing the alligator indicator. In my opinion the two first books are those worth looking at. The third is ok, but I found the "new" method described in his last book to be unprofitable actually... Just my two cents though!
  • #1,242
  • Aug 27, 2011 6:55pm Aug 27, 2011 6:55pm
Quoting Jasus
Those EAs aren't complete. The first one just buys on fractals, that's just 1/5 of what the system is.

And about the system, mathematicians and physicists had to use a supercomputer to do "6 million iterations". If they weren't applying chaos theory, I don't know what those calculations were that they had to use a supercomputer to do them.
You seem to be quite correct about the EA's..too bad, but maybe they can be modified. And Funyoo's tests show that using those simple EA's one can achieve very nice results if you optimize over the test period. But that's true of many EA's. What happens in an out of sample period is what is important.

As to 6 million iterations, that depends a lot on what was being calculated. Simply optimizing one of the EA's probably took many times 6 million iterations of some part of the code. And that does not apply any chaos theory.

My PC, and most probably yours, can do 6 million simple iterations in a millisecond or so. Minicomputers and plain old mainframes that I used to work on in 1990 could also do millions of simple iterations in a millisecond, and supercomputers were even faster. Unless you know what he was iterating, 6 million iterations is not very impressive. Do not be fooled by hype.

BTW, can you describe the computations the mathematicians and physicists were making? If they are described in one of his books, please point me at book and page. I am sincerely interested, and I may have to apologize if he really used chaos theory.

I do not argue that the system works or not, I argue that you must evaluate it while ignoring what the salesman (author) says about it. The scientific method works even in FX trading.
  • #1,243
  • Aug 28, 2011 1:34am Aug 28, 2011 1:34am
Quoting MadCow
You seem to be quite correct about the EA's..too bad, but maybe they can be modified. And Funyoo's tests show that using those simple EA's one can achieve very nice results if you optimize over the test period. But that's true of many EA's. What happens in an out of sample period is what is important.

As to 6 million iterations, that depends a lot on what was being calculated. Simply optimizing one of the EA's probably took many times 6 million iterations of some part of the code. And that does not apply any chaos theory.

My PC, and most probably...




For what is worth my approach to this method has been very similar to yours as I was trying to understand the science behind it and then apply it or perhaps even improve it. I bought all three books and read them time and time again until I came across a lot of helpful points in there which are often overlooked by the scientifically minded community. I do agree and think like you that back in the days you needed super computers to do what Excel does now in a fraction of a second and I'm with you when you say that BW hasn't given us a proof of why fractals follow the formation that he suggests in his work but, and this is a very big one, he keeps saying that the method works as long as the trader is in line with the market and uses his perspective.

At the beginning I thought this was nothing more than patronising and only after trying and failing to automate the system I realised the meaning of his message. Bottom line, I believe this is a VERY powerful method for a trader who would lilke to ride a trend for as long as possible and has the PERSPECTIVE to understand how fractals, the Elliott Wave and Profitunity signals work. Remember that Bill says that the structure of the market is the Elliott Wave and the structure of the Elliott Wave is the fractal. It all starts here and everything else follows.

Hope this helps
  • #1,244
  • Aug 28, 2011 7:03am Aug 28, 2011 7:03am
At first glance this looks like a really good way to overcomplicate your trading but at it's heart it is basically trading breakouts of s/r. This is usually profitable providing you can learn to let a trade run. I'm a big fan of Heiken Ashi, if anyone is trying this method maybe add HA candles (in custom indicators as standard with mt4) and see if it helps?
  • #1,245
  • Edited 11:22am Aug 28, 2011 10:52am | Edited 11:22am
Quoting MadCow
You seem to be quite correct about the EA's..too bad, but maybe they can be modified. And Funyoo's tests show that using those simple EA's one can achieve very nice results if you optimize over the test period. But that's true of many EA's. What happens in an out of sample period is what is important.

As to 6 million iterations, that depends a lot on what was being calculated. Simply optimizing one of the EA's probably took many times 6 million iterations of some part of the code. And that does not apply any chaos theory.

My PC, and most probably...
I'm not fooled by hype, but I don't think he'd say mathematicians and physicists did 6 million iterations to arrive at the 3 lines (which are very peculiar, because they project into the future and use 3 different timeframes) if there wasn't a scientific method behind it. And no, unfortunately he doesn't explain the computations they did. He just says they did the computations to calculate the 3 lines periods and future offsets.

This trading system is a very loose application of Chaos theory, but that's what other people with maths background do too with other systems. For example, there are people apply digital signal processing to the markets, and they always make some assumptions or apply some methods which aren't so rigorous, but it still works.
The main point in this system is that the fractals, AO, AC, trading zones and bases are the signals, and the alligator filters the noise.
  • #1,246
  • Aug 30, 2011 2:14pm Aug 30, 2011 2:14pm
Hello, I want to help create the EA.
Here thw enters how I understand:
1- fractal
2 - AO signals (allways after fractal entry)
3 - Balance line
or
1 - Bulish or Bearish divergent bar
2 - AO 3 bar of the same color
3 - fractal

For the SL I use:
The 1st SL is the uther side of the bar in wich I entered
After 3 consecutive bars in the same zone I change SL to the high/low of the preview bar
if I see divergence bar or the blu bar of the MFI I put my SL on the high/low of these bar.

P.S. Sorry for my english.
  • #1,247
  • Aug 30, 2011 7:09pm Aug 30, 2011 7:09pm
I have taken the Profiunity home study course (yes paid the nearly $5000 at the time) and used to trade Bills methods. Fractal breakouts have been replaced by "bdb's, bullish and bearish divergence bars. Justine (who is the better trader of the 2) takes them when they have a very large gap/distance from the gator. Also to note is taking trades after there is divergence between the price and the AO. Bill like to see 3-4 peaks on the AO before he take a trade as that will usually representing the end of a wave three before the AO crosses back over the zero line creating the 4th wave.

The main issue with Bills signals and applying them to an EA is the fact that they all repaint. The AO is the worst for this. Bill does not even use the AC in his trading anymore and I believe this was a main factor.

I left this style of trading and focused on Volume spread analysis and Wykoffs methods since Bill's best entries are the bullish/bearish divergence bars which are in fact springs and upthrusts (in VSA terms).

What makes Bill a great trader is his money mng abilities and his ability to control his mind while trading. If you call Profitunities office and speak with Justine about Forex she will do her best in a subtle way to direct you to the futures and stock markets.

I am all for trying to make an EA for this method but do not see how it will ever be achievable with repainting indicators that are really not suited for this market. Let me know if I can help.

There is another trader on this site who live very close to Bill and has traded with him personally. I will PM him and see if he doesnt mind stopping in on the thread to post some of the new ways Bill takes his trades.
  • #1,248
  • Aug 31, 2011 9:07am Aug 31, 2011 9:07am
Quoting Sonofsin5
I have taken the Profiunity home study course (yes paid the nearly $5000 at the time) and used to trade Bills methods. Fractal breakouts have been replaced by "bdb's, bullish and bearish divergence bars. Justine (who is the better trader of the 2) takes them when they have a very large gap/distance from the gator. Also to note is taking trades after there is divergence between the price and the AO. Bill like to see 3-4 peaks on the AO before he take a trade as that will usually representing the end of a wave three before the AO crosses back over...
Hi sonofsin5, that would be great if your friend post something in this thread.

So they're not using the old method anymore and don't trade forex market?

and i was just wondering what kind of money management does he use?

thx
  • #1,249
  • Aug 31, 2011 9:32am Aug 31, 2011 9:32am
Quoting alligator
Hi sonofsin5, that would be great if your friend post something in this thread.

So they're not using the old method anymore and don't trade forex market?

and i was just wondering what kind of money management does he use?

thx
They don't trade the method out of book 1, the method from book 2 has been completely revised with some methods taught in the private tutorial and home study course.

Bill uses pyramiding when he trades, that is also talked about in detail in their home study course as well as on page 155 of trading chaos 2nd edition.

I have not spoken with anyone from profitunity in years so I cant say what they trade anymore.
  • #1,250
  • Aug 31, 2011 11:03am Aug 31, 2011 11:03am
Quoting Sonofsin5
They don't trade the method out of book 1, the method from book 2 has been completely revised with some methods taught in the private tutorial and home study course.

Bill uses pyramiding when he trades, that is also talked about in detail in their home study course as well as on page 155 of trading chaos 2nd edition.

I have not spoken with anyone from profitunity in years so I cant say what they trade anymore.
i see, thx for the answer..
  • #1,251
  • Sep 6, 2011 11:18pm Sep 6, 2011 11:18pm
Quoting expresid
I read new dimension book and I havn't seen their such signal?chek this ?and hope that u will come with explanation for us
The methods in New Trading Dimensions is no longer used. Refer to Trading Chaos: Second Edition.

The AO signal (I think) you are referring to is where three complete consecutive bars signal an entry.

For instance, if you have green red red red bars then you would enter a pending sellstop order on pip below the low of the completed bar where you confirmed the third red bar in the AO. Your stop loss is the high of that same bar.
  • #1,252
  • Sep 6, 2011 11:36pm Sep 6, 2011 11:36pm
Quoting alligator
Hi sonofsin5, that would be great if your friend post something in this thread.

So they're not using the old method anymore and don't trade forex market?

and i was just wondering what kind of money management does he use?

thx
Before I mention anything about money management, I refer you to review the reverse pyramiding concept. In a pristine set of trades you would have a divergent candle, the AO signal, and three fractal entries consisting of 1, 5, 4, 3, and 2 contracts respectively for a total of fifteen maximum contracts.

Contracts is another name for lots.

Considering a stop loss is an executive decision on your part where you have to decide your aggression level. Referencing the EURUSD H1 chart beginning 8/31, you have your choice of following trades with a lagging five completed bar stop loss, a green line stop loss, or a red line stop loss. All of these are mentioned in the book Trading Chaos: Second Edition.

The Awesome Oscillator hit a peak 9/1 around GMT 11:00 indicating we were in the third Elliot Wave. If you are a skittish trader and used the five-bar lagging stop, your trades would have been stopped out several times. A red balance line stop loss would have kept you in the trend until 9/2. Also there was a second set of entries until wave three gave way to wave four on 9/6.

To answer your question on money management, once you have reached a level of trading where you can spot entries and take advantage of the reverse pyramiding concept you should not leverage more than 50% of your available margin. Additionally, your total margin risked is up to you if you choose a lesser amount. Ultimately if you are trading the method the market manages your trades and MM.
  • #1,253
  • Sep 8, 2011 10:32pm Sep 8, 2011 10:32pm
I nearly finished my EA like a week ago, but it still needs some changes. But I don't think this will be a winning system, it's a trading strategy with very low risk-to-reward. It needs markets that trend a lot and that don't usually reverse trend, which is the total opposite of intraday forex markets. I'm not even gonna finish it, got better things to use my time in.
  • #1,254
  • Sep 9, 2011 12:57am Sep 9, 2011 12:57am
Quoting Jasus
I nearly finished my EA like a week ago, but it still needs some changes. But I don't think this will be a winning system, it's a trading strategy with very low risk-to-reward. It needs markets that trend a lot and that don't usually reverse trend, which is the total opposite of intraday forex markets. I'm not even gonna finish it, got better things to use my time in.
Money is always made in a trend not in correction waves such as 2 and 4.

The problem with the attempt at creating a black box system is that you must make decisions based on some subjective information in the market and cannot fully automate all signals delivered using the Three Wiseman method.

I would agree if you were creating an EA to automate some functions such as the Green Line Stop Close Only or seeking out initiating trades like a divergent bar or fractal breakout. Even still there is consideration to the type of divergent bar 1-1, 1-2, 3-3, or 3-2 in addition to squat bars relative to the position of the divergent bar.
  • #1,255
  • Sep 11, 2011 10:40pm Sep 11, 2011 10:40pm
Quoting TheForexNerd
To answer your question on money management, once you have reached a level of trading where you can spot entries and take advantage of the reverse pyramiding concept you should not leverage more than 50% of your available margin. Additionally, your total margin risked is up to you if you choose a lesser amount. Ultimately if you are trading the method the market manages your trades and MM.
what does it mean by not leveraging more than 50 % of our available margin? for one trade?
  • #1,256
  • Sep 12, 2011 1:46am Sep 12, 2011 1:46am
Quoting alligator
what does it mean by not leveraging more than 50 % of our available margin? for one trade?
You would never place that amount on any one trade.

In the number of trades opened via initiating signals such as Divergent Bars and Breakout Fractals then adding on to your positions with Wiseman Fractals, Breakout Fractals, and Super AO, you would never open trades where your available margin is exceeded by 50%.

However, and this is a big however, you are to trade your own belief system where I might me comfortable with this 50% level and someone else is more comfortable with a 20% level.

Let me now talk about what you mentioned about leveraging that full amount on a single trade. Again, you would never leverage a huge amount on a single initiating trade. Instead, on a divergent bar with angulation or a breakout fractal, one lot or derivative of a single lot for your account size is enough to start the trading campaign off. If you are not yet consistently profitable only add an additional lot for each add on signal until you are experienced enough to reverse pyramid.
  • #1,257
  • Sep 12, 2011 3:54am Sep 12, 2011 3:54am
Quoting TheForexNerd
You would never place that amount on any one trade.

In the number of trades opened via initiating signals such as Divergent Bars and Breakout Fractals then adding on to your positions with Wiseman Fractals, Breakout Fractals, and Super AO, you would never open trades where your available margin is exceeded by 50%.

However, and this is a big however, you are to trade your own belief system where I might me comfortable with this 50% level and someone else is more comfortable with a 20% level.

Let me now talk about what you mentioned about...
let say if i trade 10 k in a standard account, meaning my max open position is 5 lot (5000), is that right?
  • #1,258
  • Sep 12, 2011 4:51am Sep 12, 2011 4:51am
Quoting alligator
let say if i trade 10 k in a standard account, meaning my max open position is 5 lot (5000), is that right?
1) If it is your personal belief system to trade up to half your margin yes.
2) 1 Lot != 1000. Dependent on if the USD is the base pair depends on the margin required for your trade.
  • #1,259
  • Sep 23, 2011 1:55pm Sep 23, 2011 1:55pm
Quoting yousafzai
Well even I could not have put it so nicely. Well done and thank you for that.

Yes exactly, I would enter almost any fractal, simple works.

cheers

ps: that account went up 168% today.
You have done an excellent job of simplifying what could be quite a complex trading system.

It has taken me a while to see how simple you have made it. and also how profitable.

Buying the indicators from you many months ago was perhaps the best money I have spent in several years.


I thank you


daveM
  • #1,260
  • Sep 24, 2011 4:34am Sep 24, 2011 4:34am
Hi, I've just begun to learn Profitunity. Have already grabbed the basic but some areas are still vague. Please kindly someone help me with these:

Question 1:
1. Up fractal comes up
2. A buy signal is generated
3. But the buy stop doesn't get hit yet
4. Down fractal comes up

Now, does it mean that the up fractal (no. 1) must now be ignored?

Question 2:
I've learned that it is best to stay away from the market when the alligator lines are intertwining. Now, what about downtrend? Is it possible to still make profits in downtrend market using Profitunity technique?

Question 3:
What is the best method to exit?

Thanks everyone!
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