“Trading chaos”: B. Williams’s contribution and the explanation why hundreds of thousands of merchants all around the world lose their deposits after they work based on the strategies of this creator.
The ebook “Trading Chaos” by B. Williams is the classical version that offers with giving the technical evaluation to Forex. It is of an awesome curiosity not solely to me but in addition to hundreds of thousands of B. Williams’s admirers all around the world. From the point of view of mine as a dealer, this ebook is so well-liked as a result of B. Williams tried to do the next:
1. To current Forex chaotic market as a system, making use of the chaos principle.
2. To depict his imaginative and prescient of logic of the structural parts movement on this chaos: a) the technique (Elliot’s wave principle); b) the ways (the fractal evaluation; using fractals and the so-called “key factor” – i.e., monetary and financial devices.
3. To submit 5 ranges of the skilled coaching of each dealer. Each of those ranges is clearly described and specified – in addition to the corresponding objectives and the devices that merchants should be able to utilizing at every of those ranges.
In specific, the next chapters of the ebook in query are devoted to the issues enumerated beneath:
Chapter 6. The first degree – a trader- novice.
Chapter 7. The second degree – a sophisticated newbie.
Chapter 9. The third degree – a reliable dealer.
Chapter 11. The fourth degree – a skilful (buying and selling) dealer.
Chapter 12. The fifth degree – a dealer -expert.
4. Besides, B. Williams enumerates 5 “bullets” that may “kill” any pattern -i.e., its reversal factors (factors of reference). Starting from such factors, one can develop new technique and ways of the work inside the pattern.
5. B. Williams additionally recommends making a marketing strategy. In this “control list”, one should clearly specify “the working rhythm”, the alerts from “the big finger” in regards to the deal opening, “stop-loss” ranges, cushion pads (suspension pillows), and so on.
6. As knowledgeable psychotherapist and dealer, B. Williams submits sensible suggestions to the newbies and skillful (competent) merchants – see Chapters 11 and 12 from “Trading Chaos». The essence of his attitude to traders’ principal psychological problems can be approximately formulated as the following. We learn how to integrate into the market basic structure and establish contacts with the market via realizing our own prejudices and by the development of our individual trading programs. You should compare this approach with other psychoanalysts’ viewpoints. Such “specialists” try to make money at Forex market rather incompetently (see Chapter 23, dedicated to traders’ psychological problems that arise during the work at Forex and methods of their “therapeutic”).
7. As the logical continuation of “Trading Chaos”, B. Williams has written one other ebook – see “New Dimensions in Exchange Trading”. In this book, the author presents his business approach – i.e., Profitunity “through the net”.
· He has launched the symptoms (AO, AC and Alligator). Now they’re thought to be the compulsory) parts of the vast majority of Forex buying and selling programs.
· He tried to “specify (detect) all market alerts” and open offers in the mean time when such alerts coincide concurrently, which should be confirmed by completely different indicators.
I want to carry on complimenting B. Williams for his accomplishments and contribution to Forex principle however for “one snag to it”. Several years ago I started to reflect on certain aspects of B. William’s theory. That is, as a rule, 95-97% of traders had lost at Forex before the edition of “Trade Chaos 1, -2” and “New dimensions”. At the identical time, however all achievements and discoveries by B. Williams, the variety of merchants -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 buying and selling 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 dropping cash by a dealer. Only after having discovered easy methods to detect this boundary one can develop one’s personal buying and selling system that may convey earnings at Forex.
Further, I attempt to submit my views on Forex market. Starting from the speculation, I make a transition to its sensible utility. In this manner one can higher perceive logic of the foreign money pair motion at Forex market. Consequently, this strategy helps us to hint out a basic sample of opening and shutting of transactions at Forex.
CHANGES in FOREX MARKET. FOREX CONTROLLABLE SYSTEM as an alternative of CHAOTIC MARKET and ITS CONSEQUENCES for TRADER’S WORK
Previously Forex was a chaotic market. B. Williams tried to seek out parts of a system, making use of the speculation 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} dealer 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 merchants, have ceased being of nice affect. Somebody’s curiosity “to push” a currency towards this or that direction has become much more important. Often this interest aims at usurping an N- transaction volume and a number of traders’ orders. The primary goal has become to reverse all currency pairs into the opposite direction. This is why the currency often “strikes” in opposition to the quantity, information and the frequent 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 affirm the foundations of Forex.
This is why the strategies of working at Forex, written by these classicists who handled the spontaneous market, will increasingly more diverge from the foreign money actual (true) quotations. It is important to say that on the spontaneous market the path of the pattern and its depth coincide with the buying and selling quantity. At current the bottom of 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 foreign money quotations to us on the market. It is able to reverse foreign money pairs in opposition to any quantity of merchants’ orders.
The reader ought to recall considered one of A. Elder’s principal concepts – this creator is the classicist of the inventory market technical evaluation, a dealer and the skilled psychotherapist. He states that the market is being pushed by a crowd (flock), which opens the offers in direction of one path. This ends in the commerce formation.
It is justified when one offers with the chaotic market.
But what does occur at Forex market at current?
Let us once more return to the instance of USD pattern reversal from the “bear” type to “bull” one.
The charts on April 1, 2005 are depicted beneath.
Chart 8.1. EUR/USD motion (For view image see notes in finish of article)
Chart 8.2. GBP/USD pair motion. (For view image see notes in finish of article)
Let us scrutinize GBP/USD pair conduct on April 1, 2005 after issuing of constructive knowledge on GBP and destructive ones regarding USA economics. During March, in Great Britain 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 worth heightened by $ 2.40 – as much as $ 57.70 per barrel. It was the brand new record-breaking excessive worth in 21 years. During March in USA Nonfarm payrolls had been minimal to start out from July of the earlier yr. Its earlier worth was revised in 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 belief that on the similar second all different foreign money pairs had been adjusted for good thing about USD fee rise in opposition to different nationwide currencies. Those who don’t consider can examine it – these knowledge are public and open to basic use.
There come up the questions.
1. Can merchants all around the world open transactions in USD “bear” pattern virtually on the similar second (from M1 to H4 and D1). That is, below the situation of the problem of destructive information on USA economic system, all merchants concurrently began to purchase USD and promote all nationwide currencies. Consequently, USD fee started to sky-rocket. Clearly, this case contradicts the information, logic and customary sense.
2. One ought to take note of the synchronous character of movement of all nationwide foreign money 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 (For view image see notes in finish of article)
Chart 8.4. GBP/USD pair motion (For view image see notes in finish of article)
Analysts entice our consideration to the next information. In the European session EURO/USD pair fee had elevated as much as the purpose 1.2976. In the American session it fell right down to 1.2852, minimal to start out from April 15. The fee fell greater than by 120 factors. Analysts emphasize the truth that excessive values of a number of different USA indices (CIPS and Chicago PMI) pegged USD fee.
In USA in March the non-public revenue index was +0.5%. At the identical time, the prognostication had been +0.4%, which had coincided with the earlier worth. In 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 had been 63.Zero and 69.2, respectively.
As the consequence of this second “fortuitous” reversal of currencies, USD pattern at H4 was modified – from April until the tip September, 2005 – i.e., throughout half a yr (at the very least when his chapter was being written).
As the results 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 virtually by 500 factors (from 1.7844 right down to 1.7365).
It is an absurd joke, is not it?
That is, the pattern has reversed synchronously with respect to all nationwide currencies by 1000-1900 factors for half a yr simply due to the next occasions in USA on March, 2005:
– Chicago PMI index was +0.5% as an alternative of +0.4%;
– private spending index made +0.6% rather than the earlier worth +0.7%.
Were these occasions stimulated by merchants’ needs and expectations? That is, does it seem like all merchants concurrently had been being staking fallacious time and again throughout half a yr!
Giving evaluation to all of the occasions of these two days, one can see a placing various:
1. Either we assume an absurd risk that there does exist “a world-wide plot of merchants” – big gamblers at Forex ” included. That is, merchants can at all times act synchronously, whereas National Banks of all nations carry on remaining oddly passive.
2. Otherwise, continuing from these and tons of of hundreds of the analogous examples, we should admit that Forex just isn’t a spontaneous, unpredictable and chaotic market any extra. Now it’s changed by a market, managed by any person. In phrases of Financial Times and the journal “Currency profiteer (speculator)”, this mum or dad group (the organizer of Forex ), known as “Consortium”. Below I take advantage of this time period as effectively. Consortium is able to the next:
a). in a fraction of a second to reverse USD pattern greater than by thousand of factors with respect to all nationwide currencies of the world;
b). to not give any likelihood to National Banks of all nations on this planet to stop the steep fall (or rise) of their nationwide foreign money charges with respect to USD. Surely, it’s assumable that National Banks carefully collaborate with this Consortium. However, on this context one other assertion is essential. That is, USD fee reversal happens concurrently with respect to trade charges of all nationwide currencies. However, it seems reasonably doubtful that this very day needs of all National Banks’ immediately coincided with the needs of Consortium. Probably, one other state of affairs is extra reasonable. At least a few of National Banks had been pressured to obey Consortium’s decision – i.e., to reverse USD pattern with respect to different currencies, their very own included.
Thus, there emerges a totally completely different mannequin. One should not observe “the crowd” (“the flock”), buying and selling volumes and postponed orders at Forex. Giving evaluation to a collection of things (the buying and selling quantity included), it’s needed to know the pursuits and goals of those that give quotations at Forex. Our purpose is “to trade together with those individuals”. Very typically it’s in opposition to the “crowd” and “quantity” of transactions opened by merchants. It is illustrated by the instance of the charts on April 1, 2005.
Let’s dwell on the distinction between the objectives of Organizer and customary members of any of monetary video games.
Imagine your self within the place of an organizer of any monetary recreation, the sport of ” Forex ” included. In the sneakers of Organizer, to start with you could decide your objectives and rules, reverse to these of different members of this “game”.
1. For the sport organizer it’s to realize revenue usually and stably.
2. For this goal, Organizer tries to determine the sport guidelines as easy and “impartial” as attainable. His purpose is to make this recreation engaging for all different members. In this manner Organizer collects a big viewers of merchants, independently of their age, career and different variations between them.
And now one ought to have a look at the acquainted facets from this viewpoint.
a). The elementary and technical evaluation; the military of economists-analysts and different “specialists” who train all members to work at Forex “as all do”.
b). The classical model of notions of the assist and resistance ranges (indicators, advisers, and so on.), meant for putting all suspended orders and stop-losses roughly on the similar factors.
c). An abundance of stories and elements that affect the foreign money citation conduct. As the end result, one can readily clarify the motion of any foreign money pair in any approach one likes – nevertheless, such explanations are submitted put up factum.
In case of logical gaps in “impartiality” of the foreign money pair motion clarification after the problem of stories, “foul (forbidden)” strategies are at all times “at service”. It is simply unimaginable to refute this reasoning! There are the examples: “the market is unpredictable”, “the currency has already finished “working for” the given news before its publication”, “the participants have noticed a negative aspect of the index high values, which for sure will manifest itself in future”, “an unknown clearing bank has placed an order for buying a given currency in a large amount – under the condition of the “bear” trend (when all trader stake on “promote”)”, and so on. Can you show the alternative? Surely, you can’t.
You ought to evaluate the conduct of the controllable and spontaneous foreign money markets below the situation of pressure main.
Only the pressure main issue is completely unpredictable by 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 is, such excessive conditions point out weak and robust factors of any system. It pertains to politicians’ conduct at essential intervals in a State, to placing on trial tools and to the state of affairs on the foreign money market below pressure main circumstances.
The Episode #1. The pressure main circumstances in USA on September 11, 2001. There is the distinction within the conduct of spontaneous and controllable money-markets.
Chart 8.5. EUR/USD pair motion (For view image see notes in finish of article)
Chart 8.6. GBP/USD pair motion (For view image see notes in finish of article)
The outcomes of buying and selling at Forex on September 11, 2001 ( Forexite Ltd.) are the next. The greenback 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 virtually by 330 factors (from 121.84 right down to 118.58).
The motive for drop in USD fee was the terrorists’ assaults on New-York and Washington. According to information companies, terrorists had had high-jacked passenger planes. The latter had been directed at Trading Center in New-York and Department of Defense (Pentagon) in Washington. The planes had fallen down, which precipitated the following conflagration and collapse of Trading Center two sky-scrapers. As the end result, the buying and selling at New-York Stock Exchange didn’t happen that day. It was suspended for a not mounted time frame.
The occasions in USA stimulated the drastic strengthening of 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 assist – 1.5 CHF for 1 EURO – to the purpose 1.4950. The matter is that CHF is taken into account saving (salutary) foreign money below the situations of assorted world crises. Consequently, traders had been anxious to purchase CHF as many as attainable in such an unsure state of affairs, induced by the act of terrorism in USA.
Do you get it? Panic captured the entire world – within the first place, USA itself. At the identical time, 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 all around the world. As the start line we take Special Decision by National Bank of Ukraine.
The board of administrators of National Bank of Ukraine adopted the decision, in accordance to which National Bank of Ukraine may repair a fee with out taking into consideration demand and provide. After the act of terrorism in USA on September 11, foreign money trade facilities in Ukraine raided USD shopping for fee from 5.25 down to three.0-2.5 hrivnia (Ukrainian nationwide cash) per $1. USD promoting fee was being maintained at 5, 35 hrivnia per $1. National Bank of Ukraine stipulated that USD trade fee had to not deviate from the official fee greater than by 10%. Only after threatening to cancel the license to work on the foreign money money funds market (Available Funds), foreign money trade facilities return to purchasing of USD in money based on the speed that had been in pressure earlier than September 11, 2001.
That is, in distinction to the controllable market, the spontaneous one reacted to someday of the pressure main of September 11 by the double fall in USD fee and extra!
Thus, the distinction between the reactions of the foreign money trade spontaneous and controllable markets makes 50 occasions and extra.
Is it a pure accident? Thus, it seems as at that day the merchants, every person, deciding to face by USD – in order that of their transactions they didn’t stake on USD fee hunch? Or, in all probability, a few of merchants purchased USD in opposition to different nationwide currencies, even not figuring out whether or not USA economics will retain the main positions on this planet or it’ll degree with undeveloped nations (e.g., similar to Ukraine). Is it attainable? You simply think about what would occur if one other aircraft or two had been fallen on reactors of nuclear energy crops in USA in order that the main a part of America would flip into “Chernobyl zone”!
See continuation of this text below identify Forex Secrets – Developing the “anti-chaos” buying and selling technique and ways at Forex market (Part II)
Note: Full textual content of this text and photos of examples Article
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