Larry Williams Strategy - Secrets of Legendary Trader
Larry Williams is among the legend traders, in due course many would give the latter for learning the secret of his success. This information has long ceased to be a secret, but despite the age of Larry Williams 'strategy still arouses interest and with a competent approach still works.
Working with local extremes allows you to determine the levels that play a key role in the movement of the schedule. Larry Williams's strategy actively uses trade in the direction of a release from levels of local maxima and minima.
By local maximum we will understand the Price Action pattern of 3 candles, in which the average of them has a maximum price of High compared to 2 neighboring. Local minimum - also a pattern of 3 Japanese candles, the average candle price Low is minimal compared to 2 neighboring.
Larry Williams 'trade strategy uses the obtained levels as a benchmark. If the price cannot overcome the level, then it simply does not have the power to continue rising/falling. Local extremes are used from the senior timeframes - day, week and month.
The general behavior of the market in any section of time is that the distance between the areas of the flute price is overcome quickly. But the nature of this movement still does not coincide 100% with history.
It is convenient to use Bill Williams 'fractal indicator to search for local extremes. Note only that he is looking for local highs/lows among 5, not 3 candles.
The Essence of Larry Williams 'System and Recommendations for Work
Although Williams defined key levels at senior timeslots, trade could also be conducted inside the day. The deal could have been open within hours or days.
All movement of the graph can be divided into areas of the flute when the price moves in a relatively narrow range, and trend areas, which these areas connect.
Larry Williams weekly trading system provides for the use of 2 pork patterns:
Internal bar - it is also used in Price Action. The pattern consists of 2 candles, the first - with a large body and small shadows called maternal, the second - internal. The inner candle must fall completely within the range of the mother candle (the distance between High and Low of the previous candle). It is desirable that the inner candle have a small body, shadows may not extend much beyond the maternal. If the mother is 10 or more times larger than the internal one - the signal is not taken into account.
The external bar - resembles absorption, but we are interested in the fact that the next day the market decided on the direction of movement.
Larry Williams 'strategy uses both of these patterns in conjunction with the levels built through the extremes we considered in the previous section. Williams 'own internal bar was not seen as a trend reversal, but as a section on which a set of positions takes place before the movement continues.
Entering this pattern is recommended by delayed warrants, they are placed a short distance from the maximum/minimum of the inner bar. Larry Williams 'strategy is to quickly trigger a pending warrant. If this did not happen on the next 1-2 candles, it is better to remove it.
Larry Williams 'original trade strategy does not focus on this, but the inner bar may also be a turning point if it relies on a strong level of support/resistance.
In the example on the screenshot above, everything went as Williams pointed out - not a big correction after the strong movement and its continuation. So within days, both deals would come in a solid plus.
Strike days in strategy
Strike days have a special role to play in the strategy. This term means correcting for strong trending movement and looks a little like a pattern inner bar. The difference is the size of the correction candle - the depth of correction should be about 25% of the range of the previous candle.
Login, as with the internal bar, is only done by delayed orders.
Larry Williams 'basic weekly trading system devotes 1 day (when working on the daily schedule) to correction. Not always the strike day ends with the continuation of the movement towards the main trend line. If the movement does not resume within 2-3 days, the probability of reversal increases.
The screenshot above shows how the shock day turns into a reversal. Already the second black candle after the shock day indicates that the probability of continued growth decreases. Larry Williams 's strategy only takes one day to correct, but on myforex this rule is often violated, so it is possible to take into account not 1, but 2-3 candles. And only if the movement on them does not resume, we conclude about the reversal of the market.
Larry Williams weekly trading system allows the use of indicators when working with patterns such as inner bar and strike day. The RSI indicator can be used as a filter when determining the truth of a breakout.
We will be interested in level 50, as well as the entry of the oscillator line into the resale/overbought zones.
Larry Williams 'simple intraday trade strategy
All Williams methods apply to small time intervals as well. One of his strategies, based on a pair of moving averages and local highs/lows on 3 candles worked well in the past on Н1.
For operation on schedule it is necessary to add 2 LER:
EMA indicator with period 3, will be calculated at High prices;
ЕМА3, but calculated at Low prices.
We get the Forex channel, in which most of the time the price moves. You can add an EMA with a long period, such as 20, and define the trend direction. This Larry Williams strategy requires a trend job, but does not indicate exactly how it needs to be determined, so any method can be used.
Sliding averages form a channel, signals are obtained in the form of a plot release from its boundaries. The target reference is the opposite boundary of the channel (moving average).
The main problem of the vehicle is the number of false signals and this is due to the period of moving averages. The market is too volatile and signals come too often, a lot of candles and have a range comparable to the width of the canalea at all. Don 't forget - Larry Williams forex trading strategy was created to work with futures, on myforex it began to be applied later.
Larry Williams 'strategy is not a simple weekly trading system. It is rather a whole set of tactical techniques that allowed him to become a legend among traders, which is worth it when he turned $10,000 into more than $1 million in a year.
Most of his techniques are applicable in the myforex market, and the information that is freely available is sufficient to build its own vehicle. We recommend that you not use Williams 'tactics in pure form, but combine different techniques and develop your own weekly trading system.