Absolutely NO THINKING is needed, just buy when Blue and sell when Red!
Bill Williams' Chaos System is a well-known trading system, whose indicators are available in almost any trading platform. In this article I will describe the indicators of the system and their use.
Awesome Oscillator
The Awesome Oscillator plots the difference between the 5-period MA and 34-period MA, of the Middle of Bar (H+L)/2. It is painted with green and red bars - green signal a bar that was greater than its previous one, and red signals a bar that was smaller than its previous one.
It signals are the following:
Saucer Signal
When AO is positive and a green bar appears after a red bar - enter long.
When AO is negative and a red bar appears after a green bar - enter short.
This method is actually designed to enter when the two SMAs are bouncing - the 5-SMA gets closer to the 34-SMA (so bars are red) and bounces back up (a green bar is formed). Strong signal, though it is best to confirm it with support or resistance.
Nought line crossing
This signals is very simple one, and is actually a zero-line cross.
When AO crosses the zero-line from below - enter long trade.
When AO crosses the zero-line from above - enter short trade.
This method is actually Moving Average crosses - when 5-SMA crosses 34-SMA, the AO crosses the zero line. Not a profitable method to trade.
In the next article the next indicator will be described.
TweetCLICK to see PROOF!