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Bill Williams Trading System

November 22, 2019

Bill Williams is a veteran technical analysis trader that revolutionized the Forex market, and not only. His work extends from the stock market to the commodity market and has vast applications when trading Forex too.

To form an idea about the importance of the Bill Williams indicators, the MT4, the most popular trading platform for the retail traders, dedicated a special tab containing Bill’s work. Indicators like the Accelerator Oscillator, the Alligator, the Fractal, the Gator Oscillator or the Market Facilitation Index are now part of what we al know as the Bill Williams’ trading system.

 

 

A Forex trading system based on the Bill Williams indicators is a complex one, as each indicator from the list above has different characteristics and interpretations.

The Accelerator Oscillator

This is an oscillator, therefore appears at the bottom of a chart. Because it travels both in positive and negative territory, the Accelerator Oscillator focuses on the crossing of the zero level as well as on divergences with the price.

Here’s how the oscillator appears on an MT4 trading platform offered by any Forex broker, with the oscillator showing a bearish divergence on the EURUSD daily chart, that proved to be quite accurate:

 

Trading with the Alligator

The Alligator is a trend indicator. It is formed out of three “moving averages” that have the names derived from an alligator mouth: jaws, teeth, and lips.

 

As the names suggest, the first time when the price reaches the lips, it is like meeting a fast moving average. Then it’ll try for the teeth as the next hurdle or resistance, to finally meet the jaws. If resistance on the jaws gives up, all bets are off, as trending conditions simply disappear.

In other words, the Alligator as developed by Bill Williams is a trend indicator, much resembling a trending system based on multiple moving averages.

The Other Bill Williams Indicators

The two indicators presented so far are the most important one’s part of the Bill Williams’ trading system. One is an oscillator and another one a trend indicator, making it a great combination to profit from all market conditions.

The rest of the indicators are secondary in importance. If you want, they come to complement the main trend indicator (Alligator) and the Accelerator Oscillator.

For instance, the Awesome Oscillator is almost similar to the Accelerator Oscillator. Traders use it for divergences mostly and focus on what the oscillator shows, rather than what the price does.

Fractals are tricky to deal with. The main reason is that this indicator “paints.” In the traders slang, it means that an indicator changes past values based on future market inputs.

In other words, you can’t build a strategy using the Fractals indicator without knowing that the values on the chart may very well change at some point in time.

Yet, Fractals are popular among retail traders that focus on short and very short-term trading (i.e. scalpers). They use the indicator on a bigger timeframe and trade on a much lower one.

The Market Facilitation Index or the MFI also repaints. Few traders know how to use it, but because the values change, many don’t see its value.

 

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