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ill Williams is an influential figure in the world of trading psychology and technical analysis. His fame spread quickly in the 1990s thanks to the Trading Chaos series of books and a number of popular books that he invented. Trading Chaos by Bill Williams and other books by Bill Williams are quite popular among traders and often become reference books.

He has been a trader and analyst for over half a century, teaching people for 25 years. If you are interested in any of Bill Williams' books or Bill Williams' trading system and this professional in his field generally inspires you - this article is for you!

Bill Williams has an unusual combination of higher education - a bachelor's degree in engineering physics and a doctorate in psychology. It was from this latter area that he gained his interest in the behavioral aspect of financial trading.

Bill Williams indicators description

As we mentioned earlier, Bill Williams invented several famous indicators. These are the most popular:

Bill Williams' Alligator

So let's quickly look at their use in MT5.

Bill Williams indicators in MetaTrader 5

There is , which allows you to test your strategies against historical data.

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The author of this strategy is Bill Williams, who was born in 1928 and began trading in 1959. He was then working as a teacher at a business school in Florida, and he took ideas for transactions from a professor in the accounting department, essentially completely copying his actions on his own account.

After trading like this for almost 21 years, the former teacher decided to take up professional trading. But, unfortunately, independent trading did not bring a positive result. Only after losing a lot of money trading on other people's newsletters (signals), Bill began to independently research the market, as a result of which he came to the Profitunity strategy.

Characteristics of the Profitunity strategy:

Platform: Any
Currency pairs: Any
Timeframe: Any (D1 recommended)
Trading hours: Around the clock
Recommended Brokers: Alpari, Roboforex
Any trading platform is suitable for a trading system, since Bill Williams indicators have long become a standard and are available in any terminal. The strategy can be applied on any timeframe, but the author of the strategy recommends the daily chart.

The Profitunity system consists of indicators: Alligator, Awesome Oscillator (AO) and Fractals. The Bullish/Bearish Reversal Bar pattern is also used. There are 3 input signals, each of which Bill Williams calls a “sage”.

You can enter using any of 3 types of signals, but the most significant are the signals from the bullish/bearish reversal bar and the AO oscillator. It is more advisable to use signals for entering fractals only for adding to a position.

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Bill Williams indicators

Since Bill Williams' Indicators are an integral part of the trading system described in his books, they were separated into a separate group,

2.1. Accelerator Oscillator.

The famous trader Bill Williams made a discovery at one time: he found that it is possible to predict the direction of price movements based on the acceleration or deceleration of price changes. The result of this research is the popular Accelerator Oscillator indicator.

According to Williams, acceleration or deceleration are the first signs of a trend change, so the indicator is rightfully considered leading. Visually, it is similar to MACD: a histogram in a separate window below the chart. Red bars show periods of falling prices, and green bars show periods of rising prices.

This indicator is calculated based on the readings of the Awesome Oscillator (AO): the difference between the AO histogram and its moving average for 5 periods is used. The standard Accelerator Oscillator parameters that the creator of the indicator suggests using are 5 and 34.

Accelerator Oscillator's binary options signals do not rely on the intersection of the center line. You only need to pay attention to the color and number of columns.

We consider purchasing call options in two cases:

The indicator is above the middle line, 2 green bars have formed on the histogram, both of which are above the last red bar.

The indicator is below the middle line; 3 green bars with increasing values ​​have formed on the histogram.

Accordingly, we consider the purchase of put options in the opposite cases:
The indicator is below the middle line, 2 red bars have formed on the histogram, both of which are below the last green bar;

The indicator is above the middle line; 3 red bars with decreasing values ​​have formed on the histogram.

2.2. Alligator.

The Alligator Technical Indicator is a combination of Balance Lines (Moving Averages) using fractal geometry and non-linear dynamics.

— Blue line – 13-bar MA, with 8-bar shift. Essentially, it displays where the price would be in the absence of chaos. The size of the range between the jaws and the actual price speaks to the players' interpretation of this new input.

— Red line – 8-mbar MA, with 5-mbar shift. This line also shows equilibrium, but for a smaller time frame. This timeframe is equal to approximately a fifth of the time period of the chart. That is, if you are trading on a daily chart, the line will approximately reflect the situation on a four-hour chart.

— Green Line – 5-bar MA, with a 3-bar shift into the future. Again, the green line corresponds to approximately one-fifth of the temporary tooth structure (red line). That is, it is closest to the period H1 or M30.

Together, all three lines - jaws, teeth and lips form the alligator's mouth.

Obviously, moving a blue line requires more information than moving a red or green line.

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2.3. Awesome Oscillator.

The indicator measures the momentum over the last 5 bars and compares this value with the last 34 bars. That is, the indicator displays the current strength of the impulse.
This is a very useful indicator that serves to identify trend reversals.

It does not need to be downloaded, since due to its high popularity it is built into all technical analysis programs.
The Awesome Oscillator allows you to determine the driving force of the market and provides signals for binary options when the trend reverses.

The oscillator is calculated by subtracting the moving average value from the median price for 5 shorter periods from the same indicator for 34 periods. On the chart, the Williams oscillator looks like a histogram oscillating around the zero mark.

Basically has 3 signals.

1. "Saucer".

A signal for opening bets on an increase will be a situation in which the previously ascending histogram makes a reversal near the central line of the oscillator.

As a rule, such a reversal consists of three bars, forming a small depression on the histogram, visually similar to a saucer. Accordingly, the opposite situation will be a signal for opening downside bets.

2. Crossing the zero mark.

The transition of the histogram through the central line of the oscillator from bottom to top is an ascending signal,

The transition of the histogram through the central line of the oscillator from top to bottom is a downward signal.

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3. Double peak.

A signal for further growth of the chart will be a situation in which two minimum peaks form on the histogram, the second of which is located above the first (both peaks are below the central line of the indicator).

And vice versa - a signal for binary options for a further fall in the chart will be the formation of two maximum peaks on the histogram, the second of which is lower than the first (both peaks are above the central line of the indicator).

2.4. Fractals.

Fractals are one of the five indicators of Bill Williams' trading system that allows you to detect bottoms or tops. The technical definition of an up fractal is a series of at least five consecutive bars in which the highest high is preceded and followed by two bars with lower highs.

The opposite configuration (a series of five bars in which there are two bars with higher lows before and after the lowest low) corresponds to a downward fractal. On a chart, fractals have High and Low values ​​and are marked with up or down arrows.

Signals from the Fractals technical indicator must be filtered using the Alligator technical indicator. In other words, you should not enter into a buy trade if the fractal is below the Alligator's Teeth, and you should not enter into a sell trade if the fractal is above the Alligator's Teeth.

Once a fractal signal is formed and has strength, as determined by its position outside the Alligator's Mouth, it remains a signal until it is struck or until a more recent fractal signal occurs.

2.5. Gator Oscillator.

The Gator Oscillator indicator is another proprietary tool of Bill Williams. We can say that this is an improved Alligator indicator, which is now built in a window separate from the chart and is no longer presented in the form of curves, but in the form of columns colored green or red.

The top histogram is the absolute difference between the values ​​of the blue line and the red line. The bottom histogram is the absolute difference between the values ​​of the red line and the green line, but with a minus sign because the histogram is drawn from top to bottom.

2.6. Market Facilitation Index.

The Technical Indicator Market Relief Index shows the price change per peak. The absolute values ​​of the indicator themselves do not mean anything; only changes in the indicator have meaning.

1. The Market Facilitation Index has increased and the volume has increased:

More and more players are entering the market (volume is growing),
newly arriving players open positions in the direction of the bar’s development, i.e., the movement has begun and is picking up speed.

2. The Market Facilitation Index indicator fell and the volume fell. This indicates a loss of interest among market participants.

3. The Market Facilitation Index indicator has increased, but the volume has fallen. The market is not supported by volume from traders, and the price changes due to speculation by traders “on the floor” (intermediaries - brokers and dealers).

4. The Market Facilitation Index fell, but the volume increased. There is a battle between bulls and bears, with a large volume of purchases and sales, but with a slight movement of the price itself due to approximately equal forces. One of the two opposing sides (buyers versus sellers) will win.

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Bill Williams "Trading Chaos"

You can learn more about all this in Bill Williams’ book “Trading Chaos.” The author made an attempt, using unconventional approaches to trading, to penetrate into the structure and essence of the foreign exchange market, using his own theory of chaos along with fractal geometry as the starting point of analysis.

This approach is based on the following assumption: markets are a natural phenomenon, and their development is not subject to the laws of classical physics, parametric statistics, or linear mathematics. Despite the apparent complexity of the terms used, the book contains quite a few formulas and mathematical calculations, and all the material is presented to the reader in a simplified form.

The author also introduces the concept of classification and definition of stages of evolution from a novice trader to a professional trader, showing all the necessary knowledge and practical skills at each stage of development. An excellent feature of the book is its easy presentation of the essence and precise definition of the role of each of the market instruments used for analysis.

In the book, Bill Williams offers his own money management system, which allows you to extract maximum profit from a good market situation.

Conclusion

Today we met trader Bill Williams and his famous book “Trading Chaos”. This book will be useful for both beginners and their more experienced colleagues.

Also from this article we learned how the indicators of which he is the creator work. In the book "Trading Chaos" you can look at them in more detail. Williams lost a lot of money before he came up with a strategy that led to his success. This is what he shares on the pages of his book. Who knows, maybe it will bring success to you too.

Notes:

The book also contains a lot of material about the individual psychology of a trader.

Download Bill Williams' book

The concept of a fractal in technical market analysis first appeared in 1995 with the publication of the work of the famous trader and analyst Bill Williams - “Trading Chaos”. Do not look for any connections with the concept of the same name in mathematical analysis, since there simply are none.

The most common type of fractal (partly because it is used when constructing the indicator of the same name in the MT4 trading terminal) is a fractal consisting of five candles.

The principle of its construction is as follows:

1. We consider price chart intervals consisting of five candles
2. If the third (middle) candle of the interval has a maximum higher than that of the other four candles, then a fractal icon in the form of an up arrow is drawn above it.
3. If the third candle of the interval has a minimum lower than that of the other four candles, then a fractal icon in the form of a down arrow is drawn under it.

In order to install this indicator in the MT4 trading terminal, just go through the tabs “Insert” – “Indicators” – “Bill Williams” – “Fractals".

The settings of this indicator are set by default in the trading terminal, and you will not be able to change them. The only thing you can do is set the color of the fractal arrows. To do this, first right-click on one of the fractal arrows, and then, in the drop-down menu, select "PropertiesFractals".

Application of Fractals in trading

Let's start with the main application of the Fractals indicator, which is based on the fact that a fractal inherently forms a local level of support (if it is indicated by an arrow at the bottom of the chart) or resistance (if it is indicated by an arrow at the top of the chart).

When the price chart breaks through the previous fractal, there is every reason to believe that the price will continue to move in this direction. That is, breaking through an upward fractal is a signal to buy, and breaking through a downward fractal is a signal to sell.

Bill Williams himself recommends filtering the Fractals indicator signals using another indicator (by the way, developed by him). The essence of this filtering is to consider only those buy signals that are located above the alligator’s “teeth” line (usually a red line), and only those sell signals that are located below this line.

The picture above shows an example of fractal trading using the Alligator indicator. As you can see, the position here is entered by a Buy Stop located several points above the previous upward fractal. A Stop Loss order is placed immediately after the previous downward fractal.

How else can you apply fractals in practice? They can be used to build various auxiliary technical analysis tools. You can use them to draw trend lines and resistance and support lines. With their help, you can build a whole series (using fractals as basic minimums and maximums).

conclusions

In general, Bill Williams' fractals can be safely attributed to those few tools of technical market analysis that can be used in almost any market conditions and on any markets. Based on them, you can create profitable trading strategies, just do not forget that the signals of any, even the best indicator, necessarily need to be confirmed by other technical analysis tools (other indicators, etc.).

The disadvantages of the Fractals indicator include the fact that, like most technical analysis indicators, it lags and is redrawn. True, this only applies to fractals lying no further than two fully formed candles from the current moment in time. This fact must be taken into account when using this indicator in your trading system.

Have you ever thought about how the crowd is manipulated in the market? How do big players make money from you? Especially for you, I have prepared a review of what I think is the best book dedicated to the big players - the masters of the markets.

Good day, dear traders! My name is Victor Brel, I am a trader-analyst at the Forex Academy. Today I want to discuss with you a book that really opens your eyes to many things - "Market Masters" Tom Williams.

Tom Williams is an excellent financial analyst who has an out-of-the-box mindset that is different from most traders. We can safely say that this man is a genius who has very extensive knowledge in the field of financial markets. He is a follower of the Wyckoff method, based on monitoring trading volumes and price behavior. This method was published in the 20s of the last century. Tom Williams' interpretation introduced changes to this method, and has since been adapted to the modern market. But the essence remains the same - the relationship between volume and price.

Tom Williams' book "Masters of the Markets" included the results of large-scale research, which are an indicator and proof that financial markets cannot be described by a single mathematical formula, or a set of formulas.

If you want to improve your trading literacy, look at financial markets from a different perspective, in other words, learn to think like big players, then Tom Williams’ book “Masters of the Markets” is what you need. The book discusses in detail the psychology of trading. How large market participants, by manipulating the price, provoke the crowd to make unprofitable transactions and lose money. You will learn when the "smart money" comes into play, how to recognize, see their intentions, open trades in the same direction as the financial sharks and, as a result, make a profit.

The book “Masters of the Markets” by Tom Williams is considered one of the best guides that allows you to take a large-scale look at the global financial markets, understand the rules, following which you will begin to make profitable transactions. In his book, Tom Williams describes in very accessible language the principles of interaction between price and volume. How to, based on the analysis of these two components, determine the interests of major players with the greatest accuracy.

The analysis method described in the book is called Volume Spread Analysis (VSA), which translated into Russian means “Spread and Volume Analysis”. According to Tom Williams, big players leave traces behind when they make deals. It is market analysis, namely the connection between price and traded volume, that allows you to see these traces and make profitable trades with minimal risk and high profit potential.

Prepared the article

Summary of the book “Trading Chaos” - Bill Williams

10 months ago

The book “Trading Chaos” is written very simply and accessible. It will show how you can radically improve the quality of market movement forecasts and timely identify bullish and bearish trends. The methods and approaches from the book can be applied to various markets - stock, futures, FOREX, bonds, index and many others.

Much attention is paid in the book - with many examples in the book it is shown that the benefits obtained from trading and investing are determined by what happens inside the trader.

The book is aimed at traders, investors and financial analysts.

If the goal of trading is to achieve financial well-being, then it would be appropriate to think about what exactly money is.

First of all, money is unreal. It is only a form of exchange—legal tender. Presumably they serve as an expression of value. Money does not change its value because of what happens to material objects “out there,” as opposed to what happens “here,” inside human minds.

Money itself has no value (or only a small one) other than what people give it.

Trading is undoubtedly the best way of life imaginable. A trader is his own boss, but this comes with some responsibility because he cannot blame anyone else but himself for his mistakes.

However, average traders are nervous, anxious, exhausted and confused people who sometimes wonder why they chose this path in the first place. The average trader finds trading the markets to be a highly stressful activity.

Many people, when they win, feel fear in their souls that the next trade will probably be a loss. They exhaust themselves trying to control the present and the future, while their minds fruitlessly search for ways to revive the past.

They dream of trading in a more relaxed, calm, confident and joyful way. For most traders, the possibility of such a life seems like a long lost dream. The joy of trading is gone and their lives are filled with stress.

The market is what you think it is

Reality does not exist, there is only perception.

We human beings have two innate tendencies:

1. we tend to overcomplicate everything we touch, and for this reason
2. we can't see the obvious.

For most traders and investors, the market is a dangerous and unreliable animal.

Simplicity of all markets

Markets are not at all mysterious and incomprehensible. The main goal of any market is to provide existing and future supply at a reasonable price to those who want it most. Making profits in the markets becomes much easier once you understand the underlying structure.

Every market in the world is designed to distribute or divide a limited amount of something (be it stocks, agricultural products, currencies or something else) among those who want it most. The market does this by finding and determining the exact price at which the point of absolute equilibrium currently lies between the power of those who want to buy and the power of those who want to sell.

Futures, bond, and options markets find this equilibrium point very quickly, regardless of whether they use the open auction method or computer equilibrium finding.

Trading becomes extremely complex when a trader thinks about all these stocks and futures, electronic search engines, fast order execution and second-by-second tracking of markets, yet less than 10 out of 100 traders achieve consistent success over the long term.

Most of those who trade do not succeed with trading.

Tips before you start trading:

1. Don't listen to popular experts. Remember that those who write about finance know as much or less about the markets than traders. They are paid for their words, not for the truth. If they really understood the markets, they could make a lot more money trading than they make writing about it.
2. There is no such thing as a bullish/bearish consensus. If, for example, it is reported that there is a 75% bullish consensus in the bond market, it just means that not all the bears have been polled. The market cannot maintain a bullish bias of even 50.01% before the price rises. The main task of the market is to immediately find the exact location where there is equal disagreement on value and agreement on price.
3. There is no such thing as overbought/oversold. If there is no such thing as a bullish or bearish consensus, then it logically follows that there can also be no such thing as an oversold or overbought condition.
4. Most money management offerings are ineffective.
5. Common formulas for profitable trading do not work.

Understanding, attitude, science and chaos

Trading becomes a more profitable activity when it is based on reality, and not on someone's sick imagination.

There is risk in the markets. If you have understanding and experience in trading, the markets no longer seem so dangerous.

Recently, a new view of the world has emerged - the science of chaos and nonlinear dynamics.

Market Ideas: Facts and Opinions

Ideas rule the market. However, it is influenced by two types of ideas: facts and opinions. And each type produces different kinds of results.

A fact is something that affects every trader/investor living on earth, regardless of what he trades (stocks, futures, options, bonds, etc.). There are quite a few facts. Facts are what exist. Facts cannot be changed. A fact can be manipulated or eliminated, but it cannot be changed.

Most of what influences traders and markets are opinions, which are essentially the same thing as beliefs. Opinions are beliefs about facts and, unlike facts themselves, affect only some people and only for some time. They are, however, very powerful because what traders think about markets and their movements influences how they trade, what they do, and what they think about their results. Opinions are very different from facts in that they can be changed. As opinion changes, so do experiences and market results.

Where many traders get into trouble is that they tend to confuse opinions with facts and tend to treat their opinions as facts inherent in the markets, rather than as mere perceptions of them. Typical opinions, which some traders call facts, are:

• trade is a struggle;
• winning depends on luck.
• I am powerless against floor traders;
• no one wins all the time;
• the markets are always plotting something against me;
• This is a killer market;
• my broker hates me.

If you extract the facts from these opinions, you get:

• trade;
• winning;
• nobody;
• markets;
• my broker.

These things are facts. And all you add to them are opinions. Opinions can be either positive or negative.

Rather than reacting to incoming information, opinion guides and limits response and understanding. If opinions work for a person, good.

There are a lot of profits in the market, and what a trader experiences is a result of his opinion about the market. But successful people are those who are willing to accept the idea that they themselves are an event for the markets (life), and not vice versa.

If a trader fails in the markets, it means he holds opinions that prevent him from winning.

What happens in life reflects what is happening in the human mind.

Markets are actually very simple. They find the point where there is equal disagreement about value and agreement about price.

Chaos theory

A New Paradigm for Trading

A paradigm is a general set of assumptions. It is the way we perceive the world. The paradigm explains the world and helps predict its behavior. Social paradigms determine human behavior and values.

A paradigm is a filter through which we look at the world, it is our perception of reality.

The same is true for the market. We never see it in its entirety; we see only part of it. And our mindset naturally biases us to see only those parts of the world (the market) that support our paradigms. In addition, they filter incoming information, which tends to reinforce convenient paradigms (belief systems and mental programs) that previously existed in the mind.

Every time there is a paradigm shift, all the rules change. In the conditions of the wrong paradigm, even the right actions do not produce results.

The personal paradigm through which a trader views the market determines his feelings and behavior. The science of chaos provides a new and more appropriate paradigm (map) for seeing the world, markets and one's own behavior.

Chaos and our personal world

Chaos does not mean disorder; in fact, the exact opposite is true. Chaos is a higher form of order in which disorder and stimulation become the organizing principle, as opposed to more traditional concepts of cause and effect. Markets are the epitome of chaos.

Chaos is not a new phenomenon; it existed long before the advent of humanity. Chaos is what led to the emergence of man, and chaos moves people further into the future.

From order to chaos

Fractal geometry

The science of chaos is much more than just a new trading technique. This is a new way of seeing the world.

Chaos theory is the first approach that successfully models complex forms (living and nonliving) and turbulent flows using a rigorous mathematical methodology.

Fractal geometry, one of the tools of chaos science, is used to study phenomena that are chaotic only from the point of view of Euclidean geometry and linear mathematics.

Markets are a natural nonlinear function, not a function of classical linear physics. And this explains, at least in part, why 90% of traders who use technical analysis consistently lose. Not only is it based on the false premise that the future repeats the past, but it also uses inappropriate linear techniques for analysis.

Any pattern that is the result of human interaction (for example, markets) must also have a fractal structure. Any trader with even a little experience knows that markets are not a simple mechanical result of supply and demand. Markets are a nonlinear, turbulent system created by the interaction of human beings, and the behavior of price and time provides an ideal opportunity to search for fractal structures. Finding the fractal structure of the market provides a way to understand the behavior of the entire system - namely the price movement of a particular futures or stock. This way you can see pattern, order and, most importantly, predictability where others see only chaos.

Fractal geometry and markets

Fractal geometry always works when there is chaos, turbulence, living systems or disorder. As noted earlier, fractal actually means fractal dimension.

The perception of the market depends only on what point of view, or current paradigm, the trader uses. A fractal is a measure of irregularity. The more irregular and volatile the market, the larger its fractal number will be. The fractal number of a segment of movement will always reach a maximum at the reversal point. All market trends change accompanied by a higher fractal number than the bars leading to the change in trend.

The figure shows the construction of a tree fractal on a computer. Each branch is divided into two new ones, which creates a fractal cap. The illustration on the left has six iterations, or bifurcations. By the thirteenth iteration (illustration on the right), the tree begins to look more realistic. Fractal models can produce different versions of trees depending on changes in the fractal number. Fractal trees illustrate the point that fractal geometry is a measure of change. Each new row of branches on a tree is a decision point.

The science of chaos provides an intriguing new paradigm for viewing markets, as well as a more accurate and predictable way to analyze the current and future behavior of futures or stocks. It provides a better map for trading and does not rely on building patterns from the past and applying them to the future. The science of chaos focuses on the current behavior of the market, which is a simple aggregation of the individual fractal behavior of each of many traders. A fractal is the basic structure of both the market and the individual trader.

Determining Your Basic Structure and How It Affects Wins and Losses

Economic, fundamental, mechanical and technical analyzes do not accurately reflect market behavior. If markets were linear, there would be fewer losers, especially given the high level of intelligence of the average trader.

The science of chaos provides three main principles for studying markets.

Principles of Energy Market Research

1. Energy always follows the path of least resistance.
2. The path of least resistance is always determined by the underlying and usually invisible structure.
3. The underlying and usually invisible structure can always be seen or changed.

Sometimes small changes in reasons can lead to huge changes in behavior. Every trader has the power to change the course of his life and his trading. To do this easily and consistently, you need to work with the underlying structure, not the behavior that defines it.

The basic concept derived from these three principles is that one can learn to see the underlying structure that guides trading and then change it so that one can create what one really wants to get out of the market. To be able to see the underlying structure, you need to better study its structure.

What is structure?

Any structure has four elements:

1. parts (components);
2. plan;
3. energy source
4. target.

All structures are mobile and prone to movement; this means that they tend to change their state. Some structures have a greater tendency to move than others. The most stable structures are those whose elements strive to keep each other under control, and in less stable structures they more easily allow movement.

Structure determines behavior. Structure determines the behavioral model of everything that exists around.

The structures that have the greatest impact on trading results are made up of desires, beliefs, assumptions, aspirations and, most of all, the trader's understanding of the underlying structure of the market and himself. The study of structure is an independent process and very different from the study of psychology. However, there is a strong connection between them.

In the market, traders are guided by a basic structure that governs their entire lives. Structures are impersonal. Most traders seek to change their behavior instead of changing the structure of their lives. They think that by changing behavior they will change the structure, but in fact the opposite is true.

First type structure

The structure of the first type creates a pair of action - reaction, back - forward, figure eight: after the desired behavior comes the opposite undesirable behavior.

Pendulum as an example of the first type of structure

Most traders find themselves captive and operate in structures of the first type.

Most traders find themselves caught up in this swing trading strategy based on their latest mistake. In the structure of the first type, changes occur from time to time, but they are not preserved. Any progress turns out to be temporary. The first type of basic structure causes the trader to oscillate back and forth.

Second type structure

The second type of structure is located in the creative part of the brain. The first type of structure tries to solve problems (stop losing); the second type of structure is aimed at action that will bring something new into existence. Instead of solving problems, it creates results.

The path of least resistance when solving problems leads to movement from worse to better, and then back to worse. Actions are taken to reduce the magnitude of the problem. As its relevance decreases, effort decreases and activity to take further action decreases. This creates a typical figure-eight pattern, a cyclical pattern where there is a lot of action but no real progress.

For traders who trade to solve problems rather than to create profits, much the same pattern exists.

Preparing to trade

Each of us has at least three types of thinking (superconscious, conscious and subconscious); they all work differently and each speaks a different language.

The main element of the scientific approach to finding truth, known as creating a null hypothesis, is to reject those things that are not true.

At its core, thinking is an illusion. The main disease of thinking is its constant busyness.

At a very deep level, there is simply no such thing as thinking. A thought is essentially nothing more than a group of thoughts that happen to come together at some point in time.

In life, it seems that there are many problems before us, but in fact there is only one - and this is our thinking. If you can fix this problem, then all other problems will be resolved automatically. They will simply disappear.

The process of learning never ends.

Structure and nature of thinking

Thinking is divided into three parts: conscious thinking, for which the left hemisphere is responsible; core, or unconscious thinking; and paraconscious thinking, for which the right hemisphere is responsible.

Conscious thinking. It is a feedback mechanism that strives to achieve a goal. Because the conscious mind is always trying to get somewhere, it can never be “here.”

The purpose of conscious thinking is to solve problems; that is its job. The main goal of the left hemisphere is survival. It does not measure success in terms of long-term consequences. Its main role is to maintain the status quo.

Conscious thinking is not a good judge of what is most profitable in trading the markets. There are four main functions of the conscious mind, each of which can be a barrier to success in the markets.

1. Judgment. Assessing what is appropriate and what is not. Determining whether a particular technique is best in a given situation.
2. Sense of time. The left hemisphere is the only part of the mind that perceives time as moving from the past to the present and then to the future. All other parts of thinking simply differentiate between "now" and "not now."
3. Understanding spoken and written language only exists in the left hemisphere, the rest of the brain communicates in other ways such as vibrations, feelings, emotions or scripts.
4. Struggle. Trying and strenuous efforts are characteristic only of the left hemisphere. An example of ineffective trading is a trader who tries his best to take some winning trades before the market closes today. The left hemisphere can process information at approximately 16 bits per second and operates in a linear and digital manner. It is completely unsuited to dealing with the slightest complexity, and always tries to create concepts that are ridiculously simple and abstract.

The most important program for the left hemisphere is survival. In fact, the program needs to be transplanted. In fact, you just need to carry out a “transformation”, that is, get out of the survival trance of conscious thinking, which does not allow you to move forward. It is necessary to filter incoming information on the way to the decision-making mechanism.

Trading is an inside job

All traders have two common instinctive traits:

• overcomplicate everything they touch, and for this reason
• can't see the obvious.

The obvious is that no one trades the markets, everyone trades their belief systems.

In order to succeed in the market, you need to understand its truth, and what a trader trades is the first truth.

When a trader has a crisis or a bad time in the market, the best solution lies right where the problem is. If you can't trade well, you need to study your problem. There is no need to look for another system, technique or indicator, because this new solution will always, always, always create the same or greater problem.

Every trader and investor would like to know if there is some great secret to successful trading, and indeed there is, but it is not a secret at all.

Want what the market wants

These five words contain the secret to unwavering strength and easy trading: want what the market wants. This will give new energy. This will put you on the same side as the market, and there will no longer be a need to resist its behavior. This will give a new strength that will never disappear and will lead the trader to victory in any trade.

Traders' bitter feelings about the market stem from the fact that the market does not live up to their expectations of what should happen in it.

The market does not deny success and happiness; It is traders' ideas about the market that fail them.

In trading, you should never accept emotional or mental suffering as something necessary.

We are not our accumulated memories of the past. We only subconsciously identify ourselves with them at the moment. Therefore, when you get upset while trading in the markets, there is no need to become furious or numb - it is better to try to act consciously.

Having a losing position, there is no need to get angry and worry. These feelings are born from memories that are associated with fear of loss, fear of being wrong, etc. Instead of defending your position and your old habits, you need to understand that feeling threatened or attacked is not what you really think you are. actually. True nature does not need to protect any psychological or emotional state. So you can simply put aside your reaction and be in a good position for the next unbiased decision based on wanting what the market wants.

Freed from old emotions, you can correctly perceive what is new. There is no need to continue trading in the state of worry, anger and fear that always accompanies traders trying to force the market to do what they want. Confidence is defined by independence. Trading should be fun.

The secret is to move from "how" trading to "now" trading. This transition leads to the right hemisphere, where intuition, understanding and inspiration reside.

The difference between trading "how" and trading "now"

When trading from a “how” perspective, traders are often afraid of what they don’t understand. By trading from a “now” perspective, traders understand that fear is just a mental mistake. Trading from a "how" perspective, traders look for systems to overcome excruciating losses. And when trading from the “now” position, they understand that there are no magic systems, so they simply discard the question of “how” and continue to live.

When trading from a “how” perspective, traders look to the past to find a guide to a successful future, and when trading from a “now” perspective, they are free from past trading and not thinking about tomorrow because they are trading in the painless present.

In trading, traders choose between being constantly faced with the same problems and experiencing disappointment, and understanding the true reason for what is happening in the market, and not getting into such an unpleasant situation at all.

Tips on how to learn to manage your trading.

• Before asking people for help, it is necessary to objectively assess whether they have ever been able to help themselves. You need to believe their deeds, not their words.
• Once you realize that no one really knows the market, you can stop looking for someone to explain what it is.
• People always want to be pleased. You need to be yourself and please yourself.
• Why do you need approval from those who don't even approve of themselves?
• When a person knows where he is going, he does not worry about where everyone else is going.
• If you don't jump, you'll never know what it's like to fly.
• If a man climbs to the top of a mountain, why does he care what the people in the valley do?
• You can have a relationship with something you don’t understand, but this relationship will always be built on the terms of the other party (for example, the market).
• The struggle in trade is tiring; You can think about trading endlessly.
• If a person allows others to tell him where to go, then he must also rely on them to tell him what the journey will require.
• It is necessary to free yourself and grow in the market.
• The only thing a person loses when he gets rid of what he is afraid to live without is fear itself.

What type of trader are you?

Exploring Your Trading Mindset

Today there are three types of people, depending on their attitude to risk: leaders who are willing to ignore conventional standards and achieve something more; those who are inclined to follow leaders, embrace their new ideas and take risks; and those who do not want to take risks or agree to change and want to recognize the existence of only what is known and proven.

Uncertainty is not only a part of life, but also a part of trading. You can be one of the opportunistic traders who move forward fearlessly based on your belief system. You can be an investor who bases his strategy on someone else's analysis and listens to other people's recommendations. Or you can stay where you are, focusing on the possibility of losing something instead of the possibility of winning everything.

Problems arise when a person believes that by mentality he belongs to one of the specified personality types, but in fact he belongs to another. Each trader must clearly and correctly understand what type of personality he is in order to build his trading system in accordance with his beliefs. Otherwise, the trader will create excessive, unnecessary stress in the process of making trading decisions and risks quickly exiting the market, losing his deposit. The key to success is the ability to trade according to your belief system and have fun. If you manage to achieve this, the money will come on its own.

Supernatural Trade Investing

The goal of this approach is for you to learn to trust your own thinking as you navigate the markets. It is a practical guide for traders already in the market, for those who just want to trade, and for those who have traded and lost and are now ready to learn how to do it “right.”

Most failures in the markets are caused by not knowing how some part of your thought process works. Using the right tool is a learned skill and can be taught. When mastering any common skill, a person must first master its constituent elements. Once mastered, the common skill becomes automatic and remains in memory.

Practice is the bridge between intellect and intuition.

Basic psychological structure

Nobody trades in the market; everyone trades in personal belief systems. Trade is always an internal matter for everyone.

The market is a product of chaos.

To win constantly, you need to:

• go with the flow;
• to swim with the tide;
• bend with the trend.

The market is a library that has all the answers. The challenge is to learn to ask the right questions. You must learn to "quick read" the market, be able to look at any market at any time frame and know exactly where to enter, in what direction and how to defend your position - all in 10 seconds or less.

You need to learn how to do this, because the market is a three-dimensional phenomenon:

Time + Price + Trader Psychology.

It's very simple when you really have an understanding of what's going on.

There is no need for objective systems because the market is biased. Markets are an ever-changing social process. The reasonable approach doesn't work either. Economists are smart, and they are almost never right.

How our brain works

The central brain (nucleus) is the memory store associated with paraconscious thinking, or the right hemisphere. When processing information, the core is hundreds of thousands of times more powerful than the conscious thought process.

The functions of conscious thought are language, judgment, sense of time and the need to fight. None of these functions are present in the core, so to use it we must remove them from the trading decision process.

The purpose of the core is to act as a storehouse of information in the form of memory banks and to filter incoming information through the five or more senses. The core is highly intelligent and exceptionally well functioning

a device that most traders use very little in their trading. The main limitation is that the core is not creative and cannot act inductively. It believes everything that is programmed into it.

If a trader is pre-set to lose or, conversely, accumulate a lot of money, then this will have a completely different effect on trading. Another important function of the nucleus is to make direct contact between the paraconscious part of the brain and its right hemisphere.

Cause and effect in the market: the premise on which all systems are built

For most traders, the first step is to clear their thinking.

Our minds are filled to overflowing with thoughts. Conscious thinking is just a series of thoughts and nothing more. As soon as momentary confusion, worry, doubt, desire or fear arise, thoughts begin to work feverishly. At this very moment, the mind seems to be trying to “scatter” in all directions.

This very procedure (inconsistency) is the reason why mostly wrong decisions are made in the market.

Observing the work of the mind

One of the best ways to work with thoughts is to notice them, count them and label them.

After a certain time, familiar patterns and sequences of thoughts will begin to appear that influence trading results. The key here is to pay less attention to the content of each thought and more to the process during which they arise, flow and go away. You need to control your thoughts instead of being controlled by them.

The ability to listen to the present

One of the biggest problems caused by an incessant stream of thoughts is the constant attempt to jump to the future or linger in the past. Staying in the present is almost impossible because there are many more problems in the past and future.

Traders become so obsessed with the next opportunity or the next trade that minimal attention is paid to the current one. Therefore, the first step in supernatural trading is the ability to stop, look around and listen to how your own thought patterns flow, without delving into the content of these thoughts.

The conscious mind, located in the left hemisphere, experiences a manic need to constantly present problems that need to be solved.

Techniques used in trading

Relaxation

Relaxation is to the body what meditation is to the mind: the process of turning our attention inward while releasing the physical tension normally associated with our bodies.

The Importance of "Not Knowing"

The conscious mind of the left hemisphere believes that if we do not know what is happening, then it is better to find out about everything as soon as possible. Meanwhile, the state of not knowing has a wonderful and profitable openness and satisfaction. In the very openness of “not knowing” there is room for anything, for any possibility. Much of what happens in the market cannot be predicted or controlled. Cultivating a sense of “not knowing” and being comfortable with that uncertainty helps you recognize and accept painful truths. After realizing that a trader cannot move the market, trading becomes an internal job for him.

Thinking Error

Nowhere in the human body is there such a thing as thinking. It cannot be touched, influenced or forced to stop working. It’s just that behind the walls of the human skull there is a certain organ, the brain. It has three main parts: left, right and middle. To be most effective in the markets, you need to operate from a central location.

Resonance

If a person’s thinking is calm and receptive, then he will be able to feel the vibration of the market in real time and hear it at the moment. However, as soon as the trader begins to think and evaluate (the function of the left hemisphere), the connection with the market is interrupted.

This is why markets are so confusing to most people.

The secret is to be calm, passive and receptive, without trying to use the mind to judge the present. A trader's mind is constantly working. This endless drain of energy can continue for years without limitation. Thinking about the past is a waste of time. Most thoughts about the future are the same.

Many traders spend countless hours ruminating and rethinking past actions, thereby cluttering the present, usually with negative emotions or guilt. Other traders cannot see what is happening in the present because they are constantly thinking about the future when trading will go well.

Market navigation

One of the problems associated with learning to trade is that there is no coherent and consistent system that takes a beginning trader from ignorance to knowledge or from losses to regular winnings. Currently available programs either teach the ABCs of trading or simply provide a number of popular indicators. Neither of these approaches produces consistently profitable traders.

There is, however, a universal five-step progression from initial interest in a subject, or beginner level, to expert level in any field of activity.

First level: beginner

In trading at the first level, it is necessary to study the basics of the market: the list of terms used, the trading procedure, margin requirements, etc. At this level, the trader begins to see a huge amount of information contained in the instruments. These include the price bar, or OHLC (open, high, low, close) and volume. The trader looks at the market as a process of transition from bar to bar, focusing on only two - the current and the previous one. The main interest lies in understanding the development of market behavior, and not in trying to impose some figure or pattern from the past on its current behavior.

This is the first step towards becoming an expert trader. As a beginner, a trader learns how to determine who is running the show and what is happening at the moment.

It begins to identify trends of varying lengths. Most new traders are trying to find a mechanical system that will make them rich and successful if they can simply solve the market puzzle. It's better to forget about this thought; That will not happen. The behavior patterns used by beginners, as a rule, come down to comparing prices, which is not entirely adequate, because price is a consequence, not a cause. They compare consequence with consequence. This technique does not, in principle, lead to profitable trading. It gives a good signal from time to time, but using these tools does not lead to consistent profits.

The challenge at the beginner level is to learn how to trade the market and not lose money while you gain experience. Most beginners tend to generate enormous amounts of “uplifting” energy. This enthusiasm is usually followed by depression.

At this point, most novice traders give up trading. Statistics show that most new traders survive in the market for just over three months. Those who can overcome depression by continuing to exercise will experience great success in the future.

Level two: advanced beginner

At the second level, the trader expands his time horizon and includes more

bars than was considered at the first level. Now the trader turns from a beginner to an advanced beginner. The transition to the second level means a transition from one dimension to another, of a higher order. Information becomes available that was not obvious at the first level. In the market, some examples of second level cards are fractals and Elliott waves.

This is where all traders reach a critical impasse. Will the motivation to trade be strong enough to overcome the temporary frustration associated with the learning experience in the market?

Fractals and Elliott waves are tools that reveal the underlying structure of the market. Elliott waves provide a catalog of its uptrends and downtrends.

Trading is in many ways like starting a new production process. The first thing is to provide a quality product, otherwise you will have to deal with returns from unsatisfied customers. The time to increase production volume comes only after a quality product is obtained. In the market, this means the ability to make a profit on one contract or a small number of shares. If a trader fails to do this, it means that he either has not developed a high-quality approach to trading, or is using technical techniques incorrectly.

An advanced beginner has already become a manufacturer of quality products that bring profit. Then there is a transition to the level of competence, where the trader begins to trade several contracts or a larger number of shares, and the skills mastered at the first and second levels become automatic. The trader's focus is now on maximizing the return on investment rather than making a profit on an individual contract. From a professional point of view, at the second level, a trader is in the top 3% of the best in that profession.

Third level: competent trader

In trading, competence means increasing your overall ROI. The trader competently and clearly uses tools that bring profit.

The third level means a new stage of development. The third level means the beginning of tracking not just the effect, but what most people call the “cause”.

Most traders spend so much time analyzing that they miss most of the opportunities that the market offers on a daily basis.

Having reached the third level, the trader becomes an independent professional.

Level four: master trader

In the market, a trader trades using his belief systems (adjusting his basic structure to the structure of the market) and enjoys not only making a profit, but also the fact that the trade is in sync with the market.

The fourth level represents a quantum leap from the lower three levels.

Fifth level: expert trader

The fifth level represents the starting point from which begins the kingdom of understanding that the trader has only dreamed of until now. At the fifth level, the trader sees that almost everything is information, and the main goal in processing it is to find out who he is. At this level, trading truly becomes a game in the biggest and best sense of the word; everything is important, and the trader learns from everything. He understands himself and the market, and this understanding gives him greater control over both.

At the fifth level there is a deep immersion into the realm of chaos. Chaos does not mean disorder; rather it is a higher form of order that becomes all-encompassing. There is no more chance. What is called randomness at levels one through three is actually the result of a lack of understanding and insight. At the fifth level, trading is a stress-free life.

Mighty Alligator

Understanding new incoming information (chaos)

One of the keys to profitable trading is understanding that new incoming information is what moves markets. If there is no new incoming information (in other words, chaos), the market is dead and there will be no significant price movement in any direction. The market will become a straight horizontal line. The problem is that no one can examine and evaluate all new incoming information in terms of its ability to move the price up or down.

The biggest problem of a trader

Trading is probably the most exciting way you can make a living or create wealth. In the market, a trader is both his own boss and his own worst enemy. He himself will have to deal with the disappointment caused by his own decisions. If a trader loses money, there is no one else to blame. He made a losing decision, even if it was to let someone else make decisions for him, or to follow someone else's approach. If a trader wins, he does not need to thank anyone. He owes this to no one but himself.

Here's the main problem: traders don't want to waste time and resources getting in and out of the market if it's not going anywhere, because that means there's no opportunity to make money anywhere.

The alligator is by far the best indicator for showing when a trend begins and how long it will last. The alligator is:

• an integrated approach to tracking market momentum;
• a simple indicator for trading according to the current trend;
• a safety device that prevents you from losing money during a trendless market;
• an advanced indicator showing the end of the current trend.

Alligator is a combination of Balance Lines using fractal geometry and nonlinear dynamics.

The blue line, called the Alligator's jaw, in the figure is the equilibrium line for any time structure on this chart.

This line shows where the market would be if there were no new incoming information (chaos). The distance between the blue line and the current price provides an indication of how traders interpret new incoming information.

The red line is the equilibrium line for a much smaller time structure of the chart. In this case, only approximately one fifth of it is significant. So, in general, if the time structure of the current chart is daily and it is shown by the blue line, then the red line will approximately correspond to the hourly chart.

The green line is the equilibrium line for another significant lower time structure. It is approximately one-fifth of the red line's time structure, so if we look at the daily chart, the red line

will be approximately an hourly chart, and green will be approximately a five to ten minute chart.

As you can see in the figure, the blue line shows where the market would be on a daily chart, the red line shows where it would be on a roughly hourly chart, and the green line shows where it would be on a roughly five to ten minute chart. These times are approximate and are not related to clock time. All lines are drawn using current price sequences. You don't need to have three different timelines. New incoming information will first affect the green line, then the red line, and finally the blue line.

The alligator is used to:

• provide an integrated approach to tracking market momentum across three different time frames on one chart;
• give a simple indicator to know when a trend begins and when it ends;
• create a protective device in such a way as not to lose money during a limited, narrow-range market;
• provide an improved indicator showing the end of a trend.

Once again, the blue line shows where the price would have been (in the current time structure of the chart) if new incoming information had not appeared. When market participants receive it, price bars move away from the blue line. The green line moves first, followed by the red line, and the blue line moves last. Moving a blue line requires more information than moving a red or green line. At any given time, probably no more than 1% of all outstanding stocks and futures contracts are actively traded. The owners of the remaining approximately 99% of shares and contracts do not buy or sell.

Most stocks and contracts are not involved in trading activities. During these periods, the market is locked into a narrow trading range. The same small pool of stocks and contracts is traded back and forth between active short-term and/or professional traders. A tiny portion of the outstanding shares and contracts float around, often making little profit or little loss.

New information or a stronger catalyst is needed to bring stocks held by less frequent traders to market. The information must be new and, ideally, unexpected in order to bring more people into the fray and increase the number of shares or contracts traded. It is this fresh information, which brings more shares and contracts into the market, that creates a strong trend movement in markets where the situation is controlled by supply and demand. This information helps explain why sluggish trading can be particularly difficult.

Markets may fluctuate a little less due to less important events or news and

may stop and reverse—or reach equilibrium—before most traders realize what is happening. Therefore, these people miss out on the best and most profitable trends.

The Mighty Alligator will take care of the trader in each of the following scenarios.

The green line will be the first indicator that a significant number of shares and contracts are entering the markets and the markets are moving in one direction.

The gold chart illustrates these two different phases of the market, where new incoming information was positive and created an uptrend, as seen by the divergence of the lines, and is referred to as the "hungry Alligator".

Alligator in the gold market

In the lower left corner you can see the sleeping Alligator, where most traders lose their money. Therefore, it is very important not to go to the market when the Alligator is sleeping, and to be at the market when the Alligator is awake and hungry.

Alligator on the Eurodollar chart

The Eurodollar chart shown in the figure is another brilliant example of a sleeping Alligator that "awakens" hungry and begins to "eat" prices. During most of this upward movement, prices remain above the lips of the Alligator (green line), allowing this trend to hold on as it moves up quite a distance.

Alligator on AOL Time Warner chart

Likewise, the figure illustrates what happens when new incoming information is bearish enough to push the market down. The alligator, having opened its mouth (the divergence of the green, red and blue lines) to the lower side, makes it possible to sell short with a decent profit potential.

Alligator on Apple Computer chart

In the figure, the trading range illustrated by the sleeping Alligator ends when the Alligator opens to the downside and begins a steep downward move. In this example, prices are also away from the Alligator's lips, indicating a strong downward trending movement.

Sleeping Alligator on the NASDAQ chart

The picture shows a long-dormant Alligator in a limited market. You don't want to disturb the Alligator while he is sleeping, so new positions are not opened until the Alligator wakes up from hunger. If a trader tries to trade this market while the Alligator is sleeping, he will certainly lose money due to the volatile state of market prices.

Alligator design

The design of the equilibrium lines is as follows:

• blue line – 13-bar smoothed moving average, shifted 8 bars into the future;
• red line – 8-bar smoothed moving average, shifted 5 bars into the future;
• green line is a 5-bar smoothed moving average, shifted 3 bars into the future.

These moving averages can be obtained from most market charting programs.

All three moving averages are shown on the same chart and overlaid on the price bars. The smoothed moving average is often calculated and displayed differently by different graphics programs.

The first "sage"

The buy-and-hold strategies of the past no longer produce the same returns as they once did. Succeeding in today's markets requires greater agility and greater ability to read short-term market desires.

This situation has led to the emergence of a strategy that enters the trend much earlier than it was in the past. The best tool is the bullish/bearish reversal bar.

Bullish/bearish reversal bar

In the past, bull markets ended when all the bulls had bought and there were no new buyers left. Today, aggressive short sellers also operate at the tops of trends, and this fact changes not only many behavioral characteristics of modern markets, but also the behavior of the market at the end of important trends. When the bears begin to give in to the bulls in down markets, it affects all downtrend reversals.

Therefore, you need to look for the earliest indication of such a reversal. The best opportunity is either a bullish reversal bar or a bearish reversal bar moving away from the Alligator.

A bullish reversal bar is a bar that has a lower low and a closing price in its upper half:

A bearish reversal bar represents exactly the opposite. This is a bar that has a higher high and a closing price in its lower half:

A bullish reversal bar indicates that the bears dominated at the beginning of the bar, and then the bulls took over and drove the price to the top of the bar at the close.

A bearish reversal bar indicates that at the beginning of that bar's time period the bulls were in charge (raising the price to new highs) and then the bears took over and price closed in its lower half.

Both bullish and bearish reversal bars are quite easy to identify on any chart, including candlestick charts.

Entry strategy

Once a bullish/bearish bar has formed, stops can be placed to enter. In the case of a bullish reversal bar, you need to place a buy stop just above the top of the bullish reversal bar:

Point B in the figure

And on a bearish reversal bar, you need to place a sell stop just below the bottom of the bearish reversal bar:

Point S in the figure

Since all bullish reversal bars form when the market is going down, the Awesome Oscillator is expected to be red (momentum is going down). Likewise, when a bearish reversal bar forms, the market is in an uptrend and the AO is expected to be green (indicating that momentum is moving up). A bullish/bearish reversal signal always means a counter-trend trade.

Exit strategy

After a buy or sell stop is triggered, you need to set a protective stop. The first protective stop should be placed just below the bullish reversal bar or just above the top of the bearish reversal bar. This position gives a very close initial stop loss, which will be the length of the signal bar.

On the bond chart, you should pay attention to the fifth bar from the left, which is clearly a bullish reversal bar. It is "off to the side" of the mouth, thereby creating a legitimate buy signal. Once this signal is used, a protective sell stop should be placed on the next bar just below the signal bar. The fourth bar after the bullish reversal signal bar is a bearish reversal bar, but it cannot be used as a signal bar because it is not outside the Alligator's mouth.

The next signal occurs at the top of the chart and is a bearish reversal bar well outside the Alligator's mouth. So this is a valid signal. In addition, it has good angulation. The main thing is that the angle formed by the price bars is greater than the angle formed by the Alligator's mouth.

The buy stop or stop reversal to go long should be placed just above the top of the signal bar, which is the third bar to the right. On this chart, covering approximately six weeks of bond trading on the daily chart, one would first have to go long at 108.12, then cover the position and reverse by going short at 113.25. At the next signal, the position would be closed and a reversal to the long side would follow again.

Identifying entries and exits on daily charts requires no more than a two-second study of any chart each day. Such a small investment of time allows the trader to look through many charts of various stocks and futures and select only those transactions that fit into the matrix of these “wise men”.

Second "sage"

Building a Position on Momentum

The first "sage" is essentially an anticipatory signal to quickly and aggressively increase the position.

The signal for the second input is based on the Awesome Oscillator (AO). AO is a 34 bar simple moving average that is subtracted from the fifth bar simple moving average.

You can trade futures or stocks profitably using just this oscillator.

AO tells you exactly what is happening with the current momentum.

Understanding the Awesome Oscillator

This oscillator can be used for trading in both the stock and futures markets. It measures the momentum of the last five bars and compares this figure with the momentum of the last 34 bars:

AO is also a measure of the Market Facilitation Index (MFI).

Price is the last thing that changes in markets. Momentum changes before price; and before the momentum changes, the speed of the current momentum changes; and up to the speed of the current momentum, the volume of exchange trading changes; What changes before the volume of exchange trading is that all traders and investors make chaotic decisions about their actions in the markets.

If understood and used correctly, AO is the best and most accurate indicator.

JSC buy/sell signal

AO creates what is usually the second entry into a trend that has begun to develop.

Three green AO bars create a signal to increase the position

Defending our position

The trader is in this market and has increased his position with the help of the second “sage” signal. He needs to protect his two entries and has the choice of either using a trailing stop or placing a reversal stop to switch to the short side if the forecast turns out to be wrong.

The first stop is placed just below the bottom of the price bar at which the entry was made. After increasing your initial long position, it is worth creating a fractal sell signal. If there is a fractal sell signal, then the strategy would be to cover and reverse the position and go short.

Fractal Breakthrough

Ideally, the market would be entered through the first sage (a bullish/bearish reversal bar) and the position increased using the second sage signal (three consecutive green [higher] or red [lower] bars on the AO). The market is now producing a fractal signal, which represents a market breakout after it has reversed the direction originally indicated by the bullish/bearish bar. If this fractal signal is the third entry point, it is necessary to increase some capital after the first two entries. A fractal breakout confirms that the definition of a trend change is currently valid.

Fractal figure

The fractal figure is very simple. The market moves either in one direction or the other. After a while, all those who wanted to buy bought (in the case of an upward movement), and the market rolls back because there are no buyers and, perhaps, because short sellers also enter it. Then traders begin to be influenced by some new incoming information (chaos). The volume of purchases increases, and the market, having found a new place of equal disagreement on value and agreement on price, moves up. If momentum and buying power are strong enough to surpass the previous rising fractal, a buy order can be placed just above the fractal high.

The figure shows an idealized fractal layout in the form of figure A. The technical definition of a fractal is a series of at least five consecutive bars, where the highest high is preceded by two lower highs and followed by two lower highs (the opposite configuration is applicable to define a sell fractal).

The basic structure of the market is the Elliott wave, the basic structure of which, in turn, is a fractal. Knowing how to correctly identify fractals allows a trader to trade Elliott Waves profitably without having to know which wave the market is currently in. A fractal always reflects a change in behavior caused by new incoming information (chaos).

• What happens between an ascending and descending fractal is more or less an Elliott wave.
• A fractal always reflects a change in behavior. It looks like a five-bar sequence, where the central bar (or group) has a higher high in the case of an ascending fractal and a lower low in the case of a descending fractal.
• One way to trade fractals is to take a position outward from a fractal point whenever the market exceeds the outer extreme high of an ascending fractal or falls below the low of a descending fractal.

Asset placement

One of the most difficult tasks for any trade investor is asset allocation.

Reverse pyramid

It is necessary to open a position with a minimum amount, because it is at this moment that the greatest risk is experienced. Once this open position becomes profitable and the second "sage" comes into play, you need to be more aggressive and open a much larger position, and then continue to do the same, gradually reducing the amounts you add.

This change in volume allows you to keep the average price very low and at the same time minimize losses from the stop.

The reverse pyramid is one of the best and easiest methods to achieve this increase in profits.

Exiting a trade after you have entered the market

After entering the market on one or more buy signals, it is necessary to protect a profit or prevent a large loss.

In a long position, the most common exit point is when the market falls below the lowest low of the last three or five price bars. It happens less often that a signal appears to move in the opposite direction. In most cases, the trader exits the long position before the signal appears on the short side.

Far more traders have died because of external recommendations than because of behavior based on their personal thinking or strategies.

If you have a profitable long position and the market is about to trigger a trailing stop, you need to make a decision to close all or part of the position.

This is a money management issue and involves too many individual factors for any general rule to be proposed.

The decision to exit all or part of a position is primarily a psychological matter.

Depressed traders

Teaching yourself to trade profitably is like learning to walk. You cannot judge yourself by your early trades. Comparing yourself with more successful and experienced traders is also a big mistake.

We need to stop claiming immediate greatness. It's impossible to get better and look good at the same time.

In order to be a good trader, you need to be willing to be a bad trader. Fear of success is fear of the unknown.

A list of deep but rarely mentioned and sometimes unconscious negative beliefs that most traders have.

I can't succeed because:

• everyone will hate me;
• I will cause suffering to family and friends;
• I will go crazy;
• I will leave my family and friends;
• I don't have enough good ideas;
• I don't understand economics;
• my ideas don't match what I see about markets on TV;
• I will embarrass myself in front of my family and friends;
• I will never be able to have a stable income to live on;
• I will never have “real” money;
• I will feel bad because I don’t deserve success;
• too late (we should have started studying the markets much earlier).

None of these negative internal beliefs are true.

Creativity and Problem Solving

When solving a problem, all that comes out is a solution. In trading, one is interested in a higher approach, creating what is needed.

There are some basic principles of creativity.

• Creativity is a natural part of life. Life is energy, which is pure creative thought.
• There is a basic creative force that permeates all life, including markets and ourselves.
• When we open ourselves to this creative power, we discover worlds we have never seen before and profits we have never dreamed of.
• We ourselves are a product of creation. And we, in turn, are meant to continue creating while remaining creative individuals.
• Not being creative is selfish and goes against our true nature.
• As we open ourselves to these levels, we can expect many gentle but powerful changes.
• There is no danger in opening yourself up to more and more creativity.
• Our creative dreams and desires come from a source hidden deep within us.

Most trade investors want to become more successful in order to enjoy their achievements.