Bill William basic way of trading is to postulate that fundamental or technical analysis cannot guarantee long term profitability because they simply don't see the real factors that move the market studied. Furthermore, Bill William also thinks that most traders lose because they rely on forms of analysis which became ineffective in non linear dynamic models - the real market. So lets look at Chaos theory as defined by Bill Williams and his strategy for Forex trading success.

Trading is a game of psychology,so the best way to be successful is to find your own trading style and to do this there are 2 significant aspects which need to be considered:

Self-knowledge and understand the market structure itself.

The structure of the market is determined by what is known as market dimension.

Market Dimensions Are:

• Fractal (phase space)

• Momentum (phase energy) - Awesome Oscillator

• Acceleration / Deceleration (phase force)

• Zone (phases energy / force combination)

• Balance Line (strange attractors)

Most importantly before the first dimension (Fractal) appears, all the signals created by each dimension are irrelevant. When the position was open in the same direction are formed by fractal signals, traders can add to positions in each of the signals given by the other dimensions.

The result, of all of this is - 30% of the price movement can provide an opportunity to make a profit of 90-120% profit.

Bill William theory is very sensitive to price movements, so his method has the potential to make e a profit until the last 10% of the trend, so in theory you should catch up to 80% of the trend.

The Strategy Reviewed

Bill Williams says "financial markets behave in a fractal/chaotic manner, therefore the markets are not efficient, and therefore technical analysis doesn't work and here's my trading system." Bill Williams trading strategy is not about trading Chaos theory at all and how to apply it in the market and his concepts for trading in the market and purely technical but if technical analysis doesn't work ( as he claims) why use a technical system?

Much of his trading psychology is really Zen and Tao based ideas which are not of course a trading strategy and he also discusses non-linear VS linear concepts. His writings are a good read for those who are unfamiliar with the influence of sentiment of market behaviour but knowing markets move to psychology is far different from having a method to profit from it.

The system he uses to which is a technical system. The so called chaos-derived indicators (alligator, AO, and fractals) are renamed indicators which are just moving averages and MACD with adjusted parameters.

Bill Williams uses the words chaos and fractal but his trading strategy is not based on it and many have said using these words is simply a great well to sell books and seminars which maybe right.

There are plenty of traders out there who love his work and plenty who think they have seen it all before and we fall into the latter camp.

Books

- Trading Chaos: Maximize Profits with Proven Technical Techniques

- Trading Chaos: Applying Expert Techniques to Maximize Your Profits

- New Trading Dimensions: How to Profit from Chaos in Stocks, Bonds, and Commodities