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Carey Barnett wrote:
>
> At the moment I'm analyzing Bill Williams 'Trading Chaos.' I think
>he's got something there: It answers many of my questions, and I think
>that if you follow the planned approach put forth in the book you can't
>screw it up - other than getting the wave count wrong.
>
I, too, have just recently read 'Trading Chaos.' Although it doesn't
really deal much with chaos theory, it does have a lot of practical
trading ideas. I liked the way he organized the book into levels of
trading expertise, taking you from a breakeven trader to (hopefully) a
consistently profitable trader.
Unfortunately, his system doesn't lend itself well to mechanized
backtesting in Metastock. In my preliminary manual backtesting it shows
great promise in trending markets like the currencies. The 5/13/34
triple moving average filter keeps you out of many trading ranges, but
doesn't do well in some oscillating markets (for instance, the way crude
oil has been moving lately.)
I do like the simple chart pattern he calls a 'fractal' (a high
surrounded by two lower highs on each side or a low with two higher lows
on each side, not counting bars with an equal high or low.) This helped
me eliminate some confusion I had with where to set entry and trailing
stops.
Another problem I've had in fairly testing his system is that I've never
been strong at wave counting. He points out the necessity of being able
to drop down one time frame in order to get accurate counts. This would
mean looking at hourly bars to clarify ambiguities on a daily chart and
I don't have this information available to me.
Please let me know how things are going after you've had more time to
apply William's ideas to your trading.
David.
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