“Trading chaos”: B. Williams’s contribution and the explanation why hundreds of thousands of traders everywhere in the world lose their deposits after they work in accordance with the strategies of this creator.
The ebook “Trading Chaos” by B. Williams is the classical version that offers with giving the technical analysis to Forex. It’s of nice curiosity not solely to me but additionally to hundreds of thousands of B. Williams’s admirers everywhere in the world. From the point of view of mine as a trader, this ebook is so widespread as a result of B. Williams tried to do the next:
1. To current Forex chaotic market as a system, making use of chaos concept.
2. To depict his imaginative and prescient of the logic of the movement of the structural part on this chaos: a) the technique (Elliot’s wave concept); b) the techniques (the fractal Analysis; using fractals and the so-called “key issue” – i.e., monetary and financial devices.
3. To submit 5 ranges of the skilled coaching of each trader. Every one of those ranges is clearly described and specified – in addition to the corresponding objectives and the devices that traders have to be able to utilize at every one of those ranges.
Particularly, the next chapters of the ebook in the query are devoted to the issues enumerated beneath:
Chapter 6. The primary degree – a trader- novice.
Chapter 7. The second degree – a sophisticated newbie.
Chapter 9. The third degree – a reliable trader.
Chapter 11. The fourth degree – a skillful (trading) trader.
Chapter 12. The fifth degree – a trader -expert.
4. In addition, B. Williams enumerates 5 “bullets” that may “kill” any trend -i.e., its reversal factors (factors of reference). Ranging from such factors, one can develop new methods and techniques of the work throughout the trend.
5. B. Williams additionally recommends making a marketing strategy. On this “management checklist”, one should clearly specify “the working rhythm”, the signals from “the large finger” in regards to the deal opening, “stop-loss” ranges, cushion pads (suspension pillows), and so on.
6. As an expert psychotherapist and trader, B. Williams submits sensible suggestions to the newcomers and skillful (competent) traders – see Chapters 11 and 12 from “Trading Chaos». The essence of his perspective on traders’ principal psychological issues might be roughly formulated as the next. We discover ways to combine into the market primary construction and set up contacts with the market through realizing our personal prejudices and by the event of our particular person trading packages. You need to evaluate this method with different psychoanalysts’ viewpoints. Such “specialists” attempt to generate profits on the Forex market quite incompetently (see Chapter 23, devoted to traders’ psychological issues that come up through the work at Forex and strategies of their “therapeutic”).
7. Because of the logical continuation of “Trading Chaos“, B. Williams has written one other ebook – see “New Dimensions in Exchange Trading”. In this ebook, the creator presents his enterprise method – i.e., Profitunity “through the net”.
· He has launched the indicators (AO, AC, and Alligator). Now they’re thought to be the compulsory) elements of nearly all of Forex trading techniques.
· He tried to “specify (detect) all market signals” and open offers in the mean time when such signals coincide concurrently, which have to be confirmed by completely different indicators.
I wish to carry on complimenting B. Williams for his accomplishments and contribution to the Forex concept however for “one snag to it”. A number of years in the past I began to replicate on sure elements of B. William’s concept. That’s, as a rule, 95-97% of traders had misplaced at Forex earlier than the version of “Trade Chaos 1, -2” and “New dimensions”. On the similar time, however, all achievements and discoveries by B. Williams, the variety of traders -losers nonetheless stays the identical even after the modifying of those books.
This circumstance pressured me to scrutinize a lot of B. William’s positions extra impartially and intimately. I’ve cardinally reconsidered my views on the trading at Forex.
As I see it, one should clearly distinguish domains the place strategies by B. William’s and different authors are relevant and the place they don’t work however solely speed up the method of shedding money by a trader. Solely after having realized methods to detect this boundary one can develop one’s personal trading system that may convey income at Forex.
Additional, I attempt to submit my views on the Forex market. Ranging from the idea, I make a transition to its sensible utility. On this means, one can higher perceive the logic of the currency pair motion within the Forex market. Consequently, this method helps us to hint out a common pattern of opening and shutting of transactions at Forex.
Modifications within the FX market. Forex controllable system as a substitute for a chaotic market and its penalties for trader’s work
Beforehand Forex was a chaotic market. B. Williams tried to seek out components of a system, making use of the idea of chaos. At current, the system “tries to disguise its objectives and plans” with the assistance of a superficially chaotic character of actions on this market.
As regards Consortium, the PRINCIPAL CONCLUSION that a trader should make after studying this chapter is the next. This market has ceased to be spontaneous. Now it’s organized and controllable. At current volumes of transactions, opened by traders, have ceased being of a nice effect. Any individual’s curiosity “to push” currency in the direction of this or that path has developed into rather more necessary. Typically this curiosity goals at usurping an N- transaction quantity and numerous traders’ orders. The first purpose has developed into reverse all currency pairs in the wrong way. For this reason the currency typically “strikes” in opposition to the amount, information and customary sense. The charts on April 1, 2005, completely illustrate these tendencies. I sincerely hope that everyone sees that these graphs do make exceptions however they do not verify the foundations of Forex.
For this reason, the strategies of working at Forex, written by these classicists who handled the spontaneous market, will increasingly more diverge from the currency actual (true) quotations. It’s essential to say that on the spontaneous market the path of the trend and its depth coincide with the trading quantity. At current, the bottom of the Forex market is modified in its essence. Now it is being pushed by INTEREST of a sure grouping however not by spontaneous forces. This grouping prescribes the currency quotations to us on the market. It is able to reverse currency pairs in opposition to any quantity of traders’ orders.
The reader ought to recall one among A. Elder’s principal concepts – this creator is the classicist of the Stock market technical analysis, a trader and the skilled psychotherapist. He states that the market is being pushed by a crowd (flock), which opens the offers in the direction of one path. This leads to trade formation.
It’s justified when one offers with the chaotic market.
However what does occur on the Forex market at current?
Allow us to once more return to the instance of a USD trend reversal from the “bear” kind to “bull” one.
The charts on April 1, 2005, are depicted beneath.
Chart 8.1. EUR/USD motion
Chart 8.2. GBP/USD pair motion. (
Allow us to scrutinize GBP/USD pair conduct on April 1, 2005, after issuing of constructive information on GBP and damaging ones regarding USA economics. Throughout March, in Nice Britain, the CIPS manufacturing index made 52.0 (the earlier worth had been reconsidered from 51.Eight right down to 51.6). In New York, the oil price heightened by $ 2.40 – as much as $ 57.70 per barrel. It was the brand new record-breaking excessive price in 21 years. Throughout March within the USA, Nonfarm payrolls had been minimal to begin from July of the earlier 12 months. Its earlier worth was revised in the direction of its diminution. Michigan sentiment index was 92.6 in March (the forecast had been 92.9 – it had coincided with the earlier worth). All USA indexes had fallen down.
I hope you tackle the belief that on a similar second all different currency pairs had been adjusted for the advantage of USD fee rise in opposition to different nationwide currencies. Those that don’t imagine can verify it – this information is public and open to common use.
There come up questions.
1. Can traders everywhere in the world open transactions in USD “bear” trend nearly on the similar second (from M1 to H4 and D1). That’s, beneath the situation of the problem of damaging information on the USA financial system, all traders concurrently began to purchase USD and Sell all nationwide currencies. Consequently, the USD fee started to sky-rocket. Clearly, this example contradicts the information, logic and customary sense.
2. One ought to take note of the synchronous character of the movement of all nationwide currency pairs. The distinction in time makes from a fraction of a second to a minute.
The charts on April 29, 2005, function one other instance.
Chart 8.3. EUR/USD pair motion
Chart 8.4. GBP/USD pair motion
Analysts entice our consideration to the next details. Within the European session, the EURO/USD pair fee had elevated as much as level 1.2976. Within the American session, it fell right down to 1.2852, minimal to begin from April 15. The speed fell greater than 120 factors. Analysts emphasize the truth that excessive values of a number of different USA indices (CIPS and Chicago PMI) pegged USD fee.
Within the USA in March the non-public earnings index was +0.5%. On the similar time, the prognostication had been +0.4%, which had coincided with the earlier worth. Within the USA in March the non-public spending index made +0.6%. The prognostication and the earlier worth had been +0.5% and +0.7%, respectively. In April Chicago PMI made 65.6. The prognostication had been 63.0, whereas the prognostication and the earlier worth had been 63.0 and 69.2, respectively.
Because of the consequence of this second “fortuitous” reversal of currencies, the USD trend at H4 was modified – from April until the tip of September 2005 – i.e., throughout half a 12 months (not less than when his chapter was being written).
Because of this reversal, nationwide currencies had been depreciated with respect to USD. The corresponding indicators (gauges) are the next:
· EURO fell by 1100 factors (from 1.2972 right down to 1.1865);
· GBP fell by 1900 factors (from 1.9164 right down to 1.7271);
· CHF fell by 1600 factors (from 1.1882 right down to 1.3484);
· AUD fell nearly by 500 factors (from 1.7844 right down to 1.7365).
It’s an absurd joke, is not it?
That’s, the trend has reversed synchronously with respect to all nationwide currencies by 1000-1900 factors for half a 12 months simply due to the next occasions within the USA in March 2005:
– Chicago PMI index was +0.5% as a substitute of +0.4%;
– private spending index made +0.6% instead of the earlier worth +0.7%.
Had been these occasions stimulated by traders’ needs and expectations? That’s, does it appear to be all traders concurrently had been staking fallacious again and again for half a 12 months!
Giving an Analysis of all of the occasions of these two days, one can see a hanging various:
1. Both we assume an absurd risk that there does exist “a world-wide plot of traders” – massive gamblers at Forex ” included. That’s, traders can at all times act synchronously, whereas Nationwide Banks of all international locations carry on remaining oddly passive.
2. In any other case, continuing from these and a whole bunch of 1000’s of analogous examples, we should admit that Forex will not be a spontaneous, unpredictable and chaotic market anymore. Now it’s changed by a market, managed by any person. By way of Monetary Occasions and the journal “Online Currency profiteer (speculator)”, this father or mother group (the organizer of Forex ), known as “Consortium”. Beneath I take advantage of this time period as properly. The consortium is able to the next:
a). in a fraction of a second to reverse USD trend greater than by thousand of factors with respect to all nationwide currencies of the world;
b). to not give any likelihood to Nationwide Banks of all international locations on the earth to stop the steep fall (or rise) of their nationwide currency charges with respect to USD. Certainly, it’s assumable that Nationwide Banks intently collaborate with this Consortium. Nevertheless, in this context one other assertion is necessary. That’s, USD fee reversal happens concurrently with respect to exchange charges of all nationwide currencies. Nevertheless, it seems to be quite doubtful that this very day needs of all Nationwide Banks’ all of a sudden coincided with the needs of Consortium. Most likely, one other scenario is extra life. At the least among the Nationwide Banks had been pressured to obey Consortium’s decision – i.e., to reverse USD trend with respect to different currencies, their very own included.
Thus, there emerges a very completely different mannequin. One should not comply with “the group” (“the flock”), trading volumes and postponed orders at Forex. Giving Analysis to a collection of things (the trading quantity included), it’s essential to know the pursuits and goals of those that give quotations at Forex. Our purpose is “to trade along with these people”. Fairly often it’s in opposition to the “crowd” and “quantity” of transactions opened by traders. It’s illustrated by the instance of the charts on April 1, 2005.
Let’s dwell on the distinction between the objectives of the Organizer and customary contributors of any of the monetary video games.
Think about your self within the place of an organizer of any monetary sport, the sport of ” Forex ” included. Within the footwear of Organizer, to begin with, it’s essential to decide your objectives and rules, reverse to these of different contributors to this “sport”.
1. For the sport organizer, it’s to achieve profit commonly and stably.
2. For this function, the Organizer tries to determine the sport guidelines as easy and “neutral” as potential. His purpose is to make this sport engaging to all different contributors. On this means, the Organizer collects a big viewer of traders, independently of their age, career and different variations between them.
And now one ought to have a look at the acquainted elements from this viewpoint.
a). The fundamental and technical analysis; the military of economists-analysts and different “specialists” who train all contributors to work at Forex “as all do”.
b). The classical model of notions of the Support and resistance ranges (indicators, advisers, and so on.), meant for putting all suspended orders and stop-losses roughly on similar factors.
c). An abundance of reports and elements that affect currency citation conduct. Consequently, one can readily clarify the motion of any currency pair in any means one likes – nonetheless, such explanations are submitted publish factum.
In case of logical gaps in “impartiality” of the currency pair motion rationalization after the problem of reports, “foul (forbidden)” strategies are at all times “at service”. It’s simply inconceivable to refute this reasoning! There are the examples: “The market is unpredictable”, “the currency has already completed “working for” the given information earlier than its publication”, “the contributors have seen a damaging side of the index excessive values, which for certain will present itself in future”, “an unknown clearing financial institution has positioned an order for buying a given currency in a big quantity – beneath the situation of the “bear” trend (when all trader stake on “Sell”)”, and so on. Are you able to show the alternative? Certainly, you can not.
You need to evaluate the conduct of the controllable and spontaneous currency markets beneath the situation of power main.
Solely the power main issue is completely unpredictable by the Organizer. Such circumstances impartially and clearly point out the distinction between the spontaneous and arranged (controllable) markets.
In any space, extremities at all times play the function of the second of absolute reality. That’s, such excessive conditions point out weak and powerful factors of any system. It pertains to politicians’ conduct at essential intervals in a State, to place on trial gear and to the scenario on the currency market beneath power main circumstances.
Episode #1. The power main circumstances within the USA on September 11, 2001. There’s a distinction within the conduct of spontaneous and controllable money-markets.
Chart 8.5. EUR/USD pair motion
Chart 8.6. GBP/USD pair motion
The outcomes of trading at Forex on September 11, 2001 ( Forexite Ltd.) are the next. The dollar fee sweepingly fell as in contrast with the principal nationwide currencies. EURO/USD fee elevated greater than by 200 factors (from 0.8965 as much as 0.99167). GBP/USD fee elevated greater than by 210 factors (from 1.4559 as much as 1.4773). USD/JPY fee fell nearly by 330 factors (from 121.84 right down to 118.58).
The explanation for the drop in USD fee was the terrorist assaults on New-York and Washington. In accordance with information businesses, terrorists had had high-jacked passenger planes. The latter was directed at the Trading Middle in New-York and the Division of Protection (Pentagon) in Washington. The planes had fallen down, which prompted the next conflagration and collapse of Trading Middle two sky-scrapers. Consequently, the trading on the New-York Stock Exchange didn’t happen that day. It was suspended for a not fastened time frame.
The occasions within the USA stimulated the drastic strengthening of the CHF fee. In American session, USD/CHF fee fell greater than by 530 factors (from 1.6895 right down to 1.6365). EURO/CHF fee fell greater than by 200 factors and got here down decrease than the extent of the sturdy psychological Support – 1.5 CHF for 1 EURO – to the purpose 1.4950. The matter is that CHF is taken into account saving (salutary) currency beneath the circumstances of varied world crises. Consequently, buyers had been anxious to purchase CHF as many as potential in such an unsure scenario, induced by the act of terrorism within the USA.
Do you get it? Panic captured the entire world – within the first place, the USA itself. On the similar time, the USD fee fell with respect to
– EURO by 2%;
– GBP by 1.47%;
– JPY by 2.7%.
Now allow us to decide the true fall in USD fee everywhere in the world. As the place to begin, we take Particular Choice by the Nationwide Financial institution of Ukraine.
The board of administrators of the Nationwide Financial institution of Ukraine adopted the decision, in accordance with which the Nationwide Financial institution of Ukraine may repair a fee without taking into account demand and provide. After the act of terrorism within the USA on September 11, currency exchange facilities in Ukraine raided USD buying fee from 5.25 down to three.0-2.5 hryvnia (Ukrainian nationwide money) per $1. USD selling fee was being maintained at 5, 35 hryvnia per $1. Nationwide Financial institution of Ukraine stipulated that the USD exchange fee had to not deviate from the official fee of greater than 10%. Solely after threatening to cancel the license to work on the currency money funds market (Accessible Funds), currency exchange facilities return to buying of USD in money in accordance with the speed that had been in power earlier than September 11, 2001.
That’s, in distinction to the controllable market, the spontaneous one reacted to in the future of the power main of September 11 by the double fall in USD fee and extra!
Thus, the distinction between the reactions of the currency exchange spontaneous and controllable markets makes 50 occasions and extra.
Is it a pure accident? Thus, it seems to be as at that day the traders, everyone, deciding to face by USD – in order that of their transactions they didn’t stake on USD fee droop? Or, most likely, among the traders purchased USD in opposition to different nationwide currencies, even not realizing whether or not USA economics will retain the main positions on the earth or it should degree with undeveloped international locations (e.g., resembling Ukraine). Is it potential? You simply think about what would occur if one other aircraft or two had been fallen on reactors of nuclear energy crops within the USA in order that the most important a part of America would flip into the “Chernobyl zone”!
See the continuation of this text beneath title Forex Secrets and techniques – Growing the “anti-chaos” trading technique and techniques at Forex market (Half II)
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