Trading indicators of Bill Williams

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Bill Williams Awesome Oscillator Strategy – Big Profits, Small Losses

The Bill Williams Awesome Oscillator strategy is a momentum strategy that takes advantage of the most immediate trend. This strategy is similar to our Breakout Triangle Strategy. This is because it will only give you entry signals when the momentum is confirming the price action shift. Our team at Trading Strategy Guides puts a lot of effort into developing strategies that provide you big wins with small losses. In essence, this means that from a risk management perspective, you’ll always trade with a superior risk to reward ratio. The AO Indicator has been called the “super indicator” because of the incredible results some traders have had using it.

The Bill Williams Awesome Oscillator strategy can be applied across different markets; be it stocks, commodities, indices, and Forex currencies. The preferred time frame for the Bill Williams Awesome Oscillator strategy is the daily time frame. This is because, after extensive research and backtesting, our team at Trading Strategy Guides has learned that the daily time frame produces the best performance.

Now, if you’re a day trader and you like being in an out of your trades fast, don’t you worry we’ve got your back. Our favorite day trading strategy Day Trading Price Action- Simple Price Action Strategy can teach you how to profitably daytrade any market. Also, read about the Forex Mentors and the best investment you can make.

Before we move forward, we must define the indicators you need to trade the Bill Williams Awesome Oscillator strategy and how to use Awesome oscillator indicator.

The only indicator you need is the:

Awesome oscillator indicator: The Awesome Oscillator indicator is a histogram – that is similar to the MACD indicator – displaying the market momentum of a recent number of periods compared to the momentum of a larger number of previous periods.

If you’re interested in learning more about the MACD indicator, we recommend studying the MACD Trend Following Strategy- Simple to learn Trading Strategy which is an out of the box trend following strategy.

What about the indicator setting?

The Awesome Oscillator indicator uses inbuilt default settings 5 vs. 34 periods.

So, how does it work?

Well, the Awesome oscillator indicator’s histogram (see chart below) is derived from the price chart. The Awesome Oscillator histogram is a 34-period simple moving average. This histogram is plotted through the central points of the bars (H+L)/2, and subtracted from the 5-period simple moving average, graphed across the central points of the bars (H+L)/2.


Awesome Oscillator = SMA(MEDIAN PRICE, 5)-SMA(MEDIAN PRICE, 34)

If the AO histogram is crossing above the zero line, that’s indicative of bullish momentum. Conversely, when it crosses below that’s indicative of bearish momentum.

Now, let’s move forward to the most important part of this article, the trading rules of the Bill Williams Awesome oscillator strategy.

Now, before we go any further, we always recommend to note down the trading rules on a piece of paper.

Let’s get started…

The Strategy Rules

(Rules for A Buy Trade)

Step #1: Check if the Awesome oscillator indicator is below zero

First, we want to make sure the Awesome Oscillator indicator is below zero. This first rule is part of a three-rule pattern called the Awesome Oscillator Twin Peaks. Don’t worry, this will start to make more sense to you once we go through all the three rules.

This brings us to the next rule.

Step #2: Check if the Awesome Oscillator Indicator Displays Two Swing Lows and the Second Low is Higher than the First.

Second, you need to check if there are two consecutive swing lows of the awesome oscillator histogram and the second low is higher than the first one. These two swings will form the twin peaks and from here comes the term Awesome Oscillator Twin Peaks.

There is one more rule for the Awesome oscillator Twin Peaks pattern to be validated.

Step #3: Check if the Awesome Oscillator Indicator histogram after the Second Low is Green

We need the Awesome oscillator indicator histogram after the second low to immediately turn green. This will validate the Awesome oscillator Twin Peaks pattern. When the AO histogram turns green it indicates buyers stepping in, but only a break above the zero line will signal a real shift in the market sentiment.

Now the Awesome oscillator Twin Peaks pattern has completed. But, we still don’t have confirmation that the buyers have taken the lead, which brings us to the next step of the Bill Williams Awesome oscillator strategy.

Step #4: Wait for the Awesome Oscillator Histogram to Break Above the Zero Line Before Buying at the Current Market Price

As we already learned, the Awesome oscillator indicator fluctuates between positive momentum when trading above the zero line and negative momentum when trading below the zero line. You can notice that the AO histogram bars can change from green to read while she stays above/below the zero line. This indicates various degrees of momentum strength; However, the real shift in sentiment happens once the AO histogram crosses above the zero line which is why this is our entry signal.

At this point, your trade is opened, but we still need to determine where to place our protective stop loss and take profit orders, which brings us to the next step of our strategy.

Step #5: Place Your Protective Stop Loss below the Most Recent Swing Low which Should Align with the Second Swing Low of the AO Twin Peaks Pattern.

The Awesome oscillator histogram should normally align with the price action. In this regard whenever the price forms a swing low this should be visible in the AO histogram as well.

We don’t want to add any buffer below the swing low level because any slightly break below the swing low will invalidate the AO Twin peaks pattern.

Now, the only component that needs to be clarified is where to take profit, which brings us to the final step of the Bill Williams Awesome oscillator strategy.

Step #6: Take Profit as Soon as the Awesome Oscillator Histogram Posts Two Consecutive Red Bars

We take profit at the earliest sign that the market is showing us the first sign of weakness. In this regard, when the AO histogram post two consecutive red bars we want to close our position and take profit as there is a high probability the market will reverse from thereafter.

Note** The above was an example of a buy trade… Use the same rules – but in reverse – for a sell trade. In the figure below you can see an actual SELL trade example using the Bill Williams Awesome oscillator strategy.

The Bill Williams Awesome oscillator strategy is a great strategy if you’re a momentum trader. We’re not looking to catch tops and bottoms, but we seek to enter the market when the momentum has shifted in our favor. This is a more sophisticated way to trade breakouts because breakouts also signal a shift in momentum. If you’re a fan of breakout trading, we recommend reading the Breakout Triangle Strategy, which will teach you how to correctly trade breakouts.

The most popular Bill Williams Awesome oscillator strategy is trading the Awesome Oscillator Twin Peaks pattern because most of the time it signals trades with superior risk to reward ratio.

Thank you for reading!

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Thread: Profitunity (Chaos) Trading System by Bill Williams

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Profitunity (Chaos) Trading System by Bill Williams

I am starting this thread, to learn, and to trade and review Bill Williams Chaos Trading System also known as New Trading Dimensions. All are welcome to discuss and show their trading analysis based on this trading system.

For those already familiar with this trading system, should know Bill Williams written 3 trading books, 1) Chaos Trading
2) New Trading Dimensions and 3)Trading Chaos (2nd edition)

As in the 3rd book, Trading Chaos, show more refined trades setups such
Wiseman 1 , Wiseman 2 dan Wiseman 3, I will try to focus on this setup, however, I will not limit our review on this setup only, there are several other trade setups within book number 2 ie New Trading Dimensions which also well
worth for its value.

The Indicators for this system all built-in indicators under Bill Williams indicator within MT5 and also MT4.

In my next posting I will begin with posting some charts.

Last edited by PipsPal; 09-19-2020 at 05:55 PM . Reason: add missing info

The following 3 users say Thank You to PipsPal for this useful post.

Re: Profitunity (Chaos) Trading System by Bill Williams

humm , sound great ! You Welcome freind to MT5 community .

I’m Hearing that for first time , Can u plz post this 3 ebooks download links ,so we can focus/discuss with you in your thread !

The Following User Says Thank You to Taoufik For This Useful Post:

Re: Profitunity (Chaos) Trading System by Bill Williams

humm , sound great ! You Welcome freind to MT5 community .

I’m Hearing that for first time , Can u plz post this 3 ebooks download links ,so we can focus/discuss with you in your thread !

Your Freind

Thank you Taoufik

At the moment I have only the official link at amazon dot com.
just search fo Trading Chaos, you will be lead to all the 3 ebooks.

Hopefully, later some members can provide free downloads of these ebook.

Re: Profitunity (Chaos) Trading System by Bill Williams

Shown below is the original display of the 4 indicators of this Chaos Trading System, also known as New Trading Dimensions.

1) Alligator display as 3 Moving averages. Also known each as Balance Line.
2) Fractal display as small triangle-like signs (mine shown in light blue color.)
3) Awesome Oscillator (AO) display as histogram.
4) Accelerator Oscillator (AC) display as histogram. This indicator is now
been replaced by a 9 day RSI (relative strength index). However for my
purpose, I will not use this indicator. But all members are welcome to use
it in this thread its members choice.

Re: Profitunity (Chaos) Trading System by Bill Williams

In my next post, I will show the three Trade setups using the above Chaos Trading Indicators.

Re: Profitunity (Chaos) Trading System by Bill Williams

humm , sound great ! You Welcome freind to MT5 community .

I’m Hearing that for first time , Can u plz post this 3 ebooks download links ,so we can focus/discuss with you in your thread !

Your Freind

The following 2 users say Thank You to Manyun for this useful post.

The Alligator(the 3 balance lines) have two modes.

1)Sleeping Alligator is when you see the balance lines are intertwines
with each other, reflecting the Ranging market phase.

2) Hungry Alligator wakes up from sleeping mode, opens its mouth
and starts eating all pips infronts its mouth.
p/s Alligator mouth : Green line is the lips, Red line is Teeth
Blue line is the Jaw.

As show below, the two modes of the alligator. zzz and grrr slurps!

Shown below is an example of Wiseman 3 trade setup.

This trade setup uses the fractal and the alligator to indicate trade opportunity
for entry for the buy positions.

In this case, the wiseman 3 formation is Formed and Trade Entry activities
are outside the alligator mouth/body.

p/s Trade entry level = Location of the Trade Entry (white dot)

Last edited by David; 09-23-2020 at 04:47 PM .

The following 2 users say Thank You to PipsPal for this useful post.

Re: Profitunity (Chaos) Trading System by Bill Williams

For the time being till end of this year, lets focus on the above trade setup
ie Wiseman 3.

Today on GbpUsd daily, I spotted this Wiseman 3 as shown in the chart below
p/s Forum members would able to spot the same on their trading platform.

i read about that system and i like the Alligator idea but i don’t know how to use the Fractals with this System .

so basically AO have to be above 0 and the Alligator has to be going up then i use fractals breakouts .

Bill Williams the creator of Chaos Trading System

Here’s some photo of Dr Bill Williams with Alligator
and some of his long time followers of Chaos Trading/New Trading Dimensions
from Russia and Europe(mostly professional traders)

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Analysis and Trading with Bill Williams Indicators

Analysis and Trading with Bill Williams Indicators (Bill Williams Indicators)

Bill M. Williams, a leader in the self-education of investors first began trading in 1959. His background in engineering,physics, psychology and integration of mind and body has created a unique way of looking at the markets. He is considered the forefront of trading theory, and one of the top enthusiasts of how to utilize technical analysis to improve the trading results.Bill Williams thought that the reason of losing in the market lies in traders’ reliance on different types of analyses and on the rules based on them.

Technical Analysis or fundamental analysis?

B. Williams considered them useless and even dangerous, as the market changes all the time and one cannot rely on patterns and theories used in the past. Therefore, he has promoted an approach to trading based on human

psychology rather than strictly using technical or fundamental analysis.According to Williams in order to reach success in the trading field, a trader should know the exact and whole structure of the market.This can be achieved by analyzing the market in five dimensions:

Fractal (phase space)
The driving force (energy phase)
Acceleration (deceleration (power phase)
Zone ( combination of strength / power phase)
Balance Line

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Acceleration/Deceleration (AC) Oscillator

How to Trade and Calculate the Awesome Oscillator

Acceleration/Deceleration (AC) is a technical indicator which displays the acceleration or deceleration of the market driving force at the given moment. The indicator is fluctuating between the median 0.00 (zero) level. Positive values indicate a growing bullish trend, whereas negative values signify bearish trend development. The main feature
of the indicator is that it serves as a warning sign of the possible changes in the trend direction.

So that before any trend reversals take place the indicator changes its direction.It’s important to pay attention both at the value and color of the indicator. Two consecutive green columns above the zero level are signals of entering a market with long position. Conversely, two and more red columns below the zero level indicate the short position.

How to calculate (Acceleration/Deceleration indicator)

The difference between the value of 5/34 of the driving force bar chart and 5-period simple moving average is
equal to the AC bar chart:
AO = SMA(median price, 5)-SMA(median price, 34)
AC = AO-SMA(AO, 5)

Alligator Indicator (Trading with the Alligator Indicator)

Alligator Indicator Explained – How to Use the Alligator in Forex

Alligator is the indicator which is designed to show a trend absence, its formation and direction.Bill Williams saw metaphorical resemblance between alligator’s behavior and the allegory of the market’s one: sleeping gives way
to price-hunting after which it’s again time to sleep.

The longer the alligator sleeps the hungrier it becomes and logically, the stronger the market movement will be.The indicator includes 13-, 8- and 5-period smoothed moving averages each with its own displacement (8, 5 and 3 bars respectively) which are colored blue, red and green thus representing the alligator’s jaw, teeth and lips.Alligator is sleeping when the three averages are intertwined progressing in a narrow range.

Therefore, more distant averages indicate sooner price movement.If the averages go on in an upward direction (green followed by red and blue) this shows an emerging uptrend interpreted as a signal to buy.On the other hand if the averages follow each other in the reversed order down the slope this indicates a signal of unfolding downtrend. This means that it would be quite appropriate to sell at this point.

How to calculate – Alligator – Bill Williams’ Indicators


Awesome Oscillator (AO) – Awesome Oscillator Strategy

How to Trade and Calculate the Awesome Oscillator

Awesome Oscillator (AO) represents a momentum indicator which reflects precise changes in the market driving force. The main signals presented in the indicator are saucer, nought line crossing and two peaks.Saucer represents three successive columns above the nought line.

The first two columns must be colored red where the second one is lower than the first one. The third column is colored green and stands higher than the second one. The formation like this serves as a signal to buy whereas an inverted formation would be accepted as a signal to sell.

Nought line crossing displays the histogram crossing the nought line in an upward direction which replaces its negative values by that of positive ones. Such a formation serves as a buy signal while its reversed pattern would serve as a sell signal.

Two peaks indicate a buy signal if the figure has the following formation: two consecutive peaks are below the nought line and the later-formed peak stands closer to the zero level than the earlier-formed one. The reverse formation consequently would serve as a sell signal.

How to calculate – Awesome Oscillator (AO)

where SMA — Simple Moving Average.

Fractals Indicator – How To Trade The Fractal Indicator

How to Trade and Calculate the Fractals Oscillator

Fractals indicator displays the local heights and lows of the chart highlighting where the price movement has stopped and reversed. These reversal points are called Highs and Lows respectively. Fractals consist of five consecutive bars; the first two bars successively reach higher (or dive deeper), while the last two descend lower (or grow higher). The middle bar hence forms the highest (or the lowest) point in the group.

• The arrow pointing to the top signifies buy fractal

• The arrow pointing to the bottom signifies sell fractal

Gator Oscillator (GO) – Gator Oscillator by Bill Williams

How to Trade and Calculate the Gator Oscillator (GO)

Gator Oscillator (GO) supplements the Alligator indicator and is used together with it.Gator Oscillator has a form of two histograms which are built on either side of the nought line.

In the positive area it reflects the absolute difference between the Alligator’s Jaw and Teeth (blue and red lines) and in the negative area it reflects the absolute difference between the Alligator’s Teeth and Lips (red and green lines).
If the histogram’s bars exceed the previous bar’s volume they are colored green otherwise they are colored red.
Alligator’s activity includes the following four periods:
1. Awaking – the bars on different sides of the nought line are colored differently.
2. Eating – the bars on both sides of the nought line are colored green.
3. Filling out – a single bar appearing during the “eating” phase is colored red.
4. Sleeping – the bars on both sides are red.

Market Facilitation Index (MFI) Indicator

How to Trade and Calculate the MFI Indicator

Market Facilitation Index indicates the extent of willingness to move the price in the market. The histogram bars show the absolute values of the index; however the comparison of the index and volume dynamics is presented in colors.
• Green bar indicates that both MFI and volume are up. Increasing trading activity signifies acceleration of market movement.

• Blue bar indicates that MFI is up and volume is down. Though the volume has dropped the movement is continuing.

• Pink bar indicates that MFI is down and volume is up. Volume increase in the slowing down movement may
be a sign of possible break.

• Brown bar indicates that both MFI and volume are down. The current direction is not under the market interest
as the latter tries to find signs of future development.

How to calculate – Market Facilitation Index (MFI) | Bill Williams Indicators

Trading The Alligator by Bill Williams

By Galen Woods in Trading Setups on December 13, 2020

Bill Williams introduced the Alligator which is a system that uses three displaced moving averages to isolate market trends. Bill Williams is the author of several trading books that touch on the chaos theory.

The Alligator consists of the following:

  • 13-period moving average displaced by 8 periods into the future (blue)
  • 8-period moving average displaced by 5 periods into the future (red)
  • 5-period moving average displaced by 3 periods into the future (green)

In our review, we will use the Alligator to point us in the right direction, before entering the trade with a two-bar reversal. This is my variant of using the Alligator.

Bill Williams uses a host of trading tools including Alligator, Awesome Oscillator, Acceleration/Deceleration, Fractals, and Market Facilitation Index. If you want to use the Alligator with these indicators, refer to his books for more information.

Trading Rules – Alligator System

Long Trade Signal

  1. Green line above red line
  2. Red line above blue line
  3. Bullish two-bar reversal

Short Trade Signal

  1. Green line below red line
  2. Red line below blue line
  3. Bearish two-bar reversal

The Alligator Trade Examples

Winning Trade – Trading The Alligator

This is a daily chart of Microsoft, which shows a nice swing trade after the Alligator opened its mouth.

  1. The moving averages were crisscrossing. This means that the Alligator was sleeping and storing energy for an impulse move.
  2. The moving averages aligned and pointed down. The Alligator has set the stage for a bearish trade. This Alligator signal was also confirmed by the strong move down as the Alligator lines spread out.
  3. The pullback up to the middle moving average ended with an inside bar. We shorted a tick below the inside bar.

Losing Trade – Trading The Alligator

This daily chart of Walt Disney shows a wide trading range in which we observed several unreliable Alligator signals.

  1. Prices filled a previous gap just before the Alligator gave the go-ahead for shorts, with the three moving averages aligned. Since prices filled the gap, we could expect support at the same level.
  2. With the bearish inside bar reversal, we shorted. However, we got stopped out by an outside bar almost immediately.
  3. This failed Alligator trade was a precursor to a trading range in which Alligator signals were unreliable.

Review – Trading the Alligator System

The main drive of Bill William’s books is that traditional trading indicators do not work because they ignore the chaotic nature of markets.

However, I could not see how the indicators introduced in his book, including the Alligator system, are chaotic. So the Alligator’s trading edge, if any, does not come from applying chaos theory.

Basically, the Alligator is a multiple displaced moving average system. I find this trading method similar to the moving average fake-out by Mark Fisher which also uses three moving averages. Both systems are good at keeping us out of the market when it is going sideways.

To increase the odds of finding strong break-outs, focus on Alligator setups that have just experienced a long period of rest.

To confirm a valid Alligator break-out, look out for impulsive moves when the moving averages align, just like in the winning trade example. You want to see at least three consecutive bars moving along with the Alligator system before trusting the break-out. Without paying attention to the price action, it is unlikely that this trading strategy is effective.

For those interested in the financial chaos and the fractal nature of prices, The Misbehavior of Markets: A Fractal View of Financial Turbulence by Mandelbrot gives an insightful overview.

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