At one time , Bill Williams' book "Trading Chaos" was very popular. The author argued that there is no point in conducting technical or fundamental analysis because they do not work in the long term, and all processes in the market are completely random.
We do not agree with this statement, since we have a real example of a binary options strategy that is based on technical analysis. You can check it yourself.
If we talk about the success of traders using the “Trading Chaos” strategy, then opinions and results vary. Some use it successfully, while others fail. After reading the article to the end, you will understand what was missing for those who were unable to successfully apply this strategy.
The essence of the “Trading Chaos” strategy
Let's return to "Trading Chaos". The author, among other things, argued that it is important to understand the structure of the market. And this is a very true statement.
Every trader wants to know when a new trend will begin so that the maximum profit potential can be extracted from the trade. This strategy allows you to see the emergence of a new trend.
This strategy was originally used for the stock and forex markets, but it can easily be adapted for binary options trading.
Characteristics of the “Trading Chaos” strategy
- Terminal: MetaTrader 4 .
- Time frame: M1-M5.
- Expiration: M5 and higher.
- Types of options: Call/Put.
- Indicators: Awesome Oscillator, Alligator, Fractals.
- Trading instruments: Any.
- Trading hours: 9:00-17:00.
- Recommended brokers: Quotex , PocketOption , Binarium .
Characteristics of indicators of the “Trading Chaos” strategy
Awesome Oscillator. This oscillator is a modified MACD, but the calculation is not based on closing prices, but on median prices.
Alligator. This indicator is also based on moving averages, but only smoothed and forward-shifted.
Fractals. Fractals are formed after a combination of five consecutive candles. If each candle is higher than the previous one, the fractal will be on the last of the five. There may be such a situation:
Five candles is not necessarily a meaning. There may be fewer of them. The following combinations are possible:
Installing indicators for the “Trading Chaos” strategy
All the indicators we need are available in every MetaTrader4 terminal. To add them to the chart, open the Insert tab -> Indicators -> Bill Williams and select the indicators we need from the list or simply go to the terminal navigator and add them from there. We leave the indicator settings as standard.
Also in the MetaTrader4 terminal there is a standard template for this strategy, or you can download our template at the end of the article.
You can also use the live chart on our website. All the necessary indicators are there, as are any trading tools.
By adding all the indicators to the chart or using a template, we should end up with a chart like this:
Rules for trading using the Trading Chaos strategy
This strategy is good because it can be used for both quick transactions and longer ones. If you like to open trades with an expiration time of about five minutes, then you should use the M1 TF on the chart, but if you hold trades for an hour or more, use the M5-15 TF, but no less.
Everyone knows that trend movements occur during the European and American trading sessions . Therefore, it is important to trade at this time, namely from 9:00 to 18:00 Moscow time.
If the trend is determined, then we need to wait until the Alligator lines intersect in the direction we need, and the ideal confirmation for the Alligator would be the price updating the previous Fractal and the oscillator being below or above the zero line, depending on the trend.
Examples of trading using the “Trading Chaos” strategy
Let's look at everything using specific examples. We will use M5 expiration and the EUR/USD currency pair.
Opening a Put option
In the figure below we see a downward trend on M1. The Alligator lines crossed down, the oscillator is preparing to cross the zero line, and later the previous Fractal was updated.
In this example, it can be seen that a 5-minute expiration would give a profit, and since the trade is on a trend, longer trades would also give a profit.
We ignored the signal against the trend.
Opening a Call Option
In the figure below we see an upward trend on M1. The Alligator lines have crossed upward, the oscillator is above the zero line, and the previous Fractal has been updated.
As in the previous example, here we also see that a 5-minute expiration would give a profit, and since the transaction follows a trend, longer transactions would also give a profit.
We ignored the signal against the trend.
Why did most traders lose money with the Trading Chaos strategy?
So why have some traders failed to implement this strategy successfully? Looking at the chart, you can see that a lot of false signals appear during the day. But the strategy itself does not show anything of its own, it simply follows the price. Therefore, the main rule that many people ignore is to always look for entries only according to the trend. No matter how banal it may sound, this is the whole secret. All those who did not succeed were simply playing against the trend.
Conclusion
As you can now see, with this binary options strategy it is still possible to curb the “trading chaos”. Its versatility is confirmed by the fact that it can be used on any instrument and on almost any time frame. And the rules will be clear even to beginners.
But do not forget that a certain strategy for binary options will show different results for different people. Always keep a level head while trading, control your emotions, and you will definitely achieve success!
Download strategy template "Trading Chaos"
Can't figure out how this strategy or indicator works? Write about it in the comments to this article, and also subscribe to our YouTube channel WinOptionSignals , where we will definitely answer all your questions in the video.
See also:
Free robot advisor for binary options
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