Bill Williams indicators
Bill Williams - a well-known American trader who is the founder of a "Chaos Theory" doctrine and the trader's movement around the basic tenets of the same name trading system use. Bill created a package of indicators that are currently available in all sorts of trading platforms for trading binary options.
So, according to the theory of Bill Williams, the financial market as a whole and each chart quotes in particular is chaos, controlled by driving forces that have nothing to do with the fundamental forces and technical analysis.
As part of the study of price movement trends of different financial assets as well as the forces which they are driven by, Bill Williams created his own indicators, namely:
Alligator - an indicator that, according to its creator, is the best for showing the balance line of the asset in the market.
This indicator has total of the three balance lines - green, red and blue lines - jaw, teeth and lips of an alligator. Using an Alligator indicator, it is the easiest to determine the presence of flat or trending market.
When the three lines are intertwined - alligator is napping, and so the market is also asleep. At the same time, trading is carried out in a narrow range, and the market takes everything the trader earned before. The longer Alligator sleeps, the more it grows the appetite and the more he wants to eat, and it means that when he wakes up the movement in the market is expected to be the strongest. When the indicator lines are intertwined, the market is not worth getting into.
When Alligator wakes up, he opens his hungry mouth that means the redistribution of forces and balance lines on the market. In this case, alligator rushes up or down in the hunt for trend points. After Alligator is full, he falls asleep together with the market.
Thus, if the price of the asset is above or below the jaws of an alligator, it indicates a strong trend.
Another function of the alligator is to help in identifying Elliott wave market patterns. At the time when the price is outside of the Alligator's mouth - the market is in a phase of the pulse wave. When the price is inside his mouth, then the market is in the correctional wave.
Gator Oscillator indicator is used to identify periods of wakefulness and sleep of Alligator, and also serves as an assistant in determination of the degree of divergence of the Alligator indicator mouth Balance Lines.
Gator consists of two histograms:
- histogram above the zero line, this is the part which is responsible for determining the distance between the blue and the red line of Alligator indicator (his lips and teeth);
- histogram below the zero line helps to determine the distance from red to green carrying lines (between the teeth and lips of Alligator indicator).
Bill Williams fractals
Space indicator, which is used to determining the spatial variation of the asset market that Bill compares with chaos. With this indicator trading the Bill Williams system begins.
There are 2 types of fractals:
- fractal for buying;
- fractal for selling.
If a fractal is formed on top of the chart, this is a buying fractal. If in the bottom then it is a selling fractal.
According to the Bill Williams theory - fractal is the beginning of a trend change. Thus, any buying or selling trade must begin with the fact that the price must overcome one of fractals that is to break the fractal rendered high or low.
Awesome Oscillator - an indicator of the driving forces of the market, which is also made up by Bill Williams. Specified technical indicator measures the force that moves the market in a given second, according to the latest 5 and 34 bars.
Said indicator shows signal for purchase and sale by painting a saucer on its scale chart while changing the color. That is, if the bottom of the scale for a grown saucer the color is changed from red to green, and the histogram bars started upward movement, it is a signal to buy according to the theory of Bill Williams.
Thus, if the color of the saucer has changed from green to red, and the histogram is on top of the zero level – it is a signal to sell, if the opposite – to buy.
Acceleration Oscillator - Williams indicator which indicates the acceleration and deceleration rates on the chart.
In his book "Chaos Theory," the work of the given indicator is compared with the movement of the ball, which at some point is kicked downhill and it being accelerated begins to roll up the road more and more slowly. In order to the process of the ball stopping does not catch us by surprise, acceleration indicator will show us this process of slowing down, until the time when the ball starts to roll in the opposite direction. That is, if we are planning to enter the market, Acceleration Oscillator will just show us the trend potential.
However, in this case, the signals for buying and selling do not depend on the indicator histogram being above or below its zero level. Fundamental for the indicator are: the color of chart and its location relative to the other columns of the indicator.