| "Trading chaos": B. Williams's contribution and the | | | | changed - from April till the end September, 2005 |
| reasons why millions of traders all over the world | | | | - i.e., during half a year (at least when his chapter |
| lose their deposits when they work according to | | | | was being written). |
| the techniques of this author. | | | | As the result of this reversal, national currencies |
| The book "Trading Chaos" by B. Williams is the | | | | were depreciated with respect to USD. The |
| classical edition that deals with giving the technical | | | | corresponding indicators (gauges) are the following: |
| analysis to Forex. It is of a great interest not only | | | | · EURO fell by 1100 points (from 1.2972 |
| to me but also to millions of B. Williams's admirers | | | | down to 1.1865); |
| all over the world. From the viewpoint of mine as | | | | · GBP fell by 1900 points (from 1.9164 |
| a trader, this book is so popular because B. | | | | down to 1.7271); |
| Williams tried to do the following: | | | | · CHF fell by 1600 points (from 1.1882 |
| 1. To present Forex chaotic market as a system, | | | | down to 1.3484); |
| making use of the chaos theory. | | | | · AUD fell almost by 500 points (from |
| 2. To depict his vision of logic of the structural | | | | 1.7844 down to 1.7365). |
| components motion in this chaos: a) the strategy | | | | It is an absurd joke, isn't it? |
| (Elliot's wave theory); b) the tactics (the fractal | | | | That is, the trend has reversed synchronously |
| analysis; the use of fractals and the so-called "key | | | | with respect to all national currencies by |
| factor" - i.e., financial and economic instruments. | | | | 1000-1900 points for half a year just because of |
| 3. To submit 5 levels of the professional training | | | | the following events in USA on March, 2005: |
| of every trader. Each of these levels is clearly | | | | - Chicago PMI index was +0.5% instead of |
| described and specified - as well as the | | | | +0.4%; |
| corresponding goals and the instruments that | | | | - personal spending index made +0.6% in place of |
| traders must be capable of using at each of | | | | the previous value +0.7%. |
| these levels. | | | | Were these events stimulated by traders' wishes |
| In particular, the following chapters of the book in | | | | and expectations? That is, does it look like all |
| question are dedicated to the problems | | | | traders simultaneously were being staking wrong |
| enumerated below: | | | | over and over again during half a year! |
| Chapter 6. The first level - a trader- novice. | | | | Giving analysis to all the events of those two |
| Chapter 7. The second level - an advanced | | | | days, one can see a striking alternative: |
| beginner. | | | | 1. Either we assume an absurd possibility that |
| Chapter 9. The third level - a competent trader. | | | | there does exist "a world-wide plot of traders" - |
| Chapter 11. The fourth level - a skilful (trading) | | | | big gamblers at Forex " included. That is, traders |
| trader. | | | | can always act synchronously, whereas National |
| Chapter 12. The fifth level - a trader -expert. | | | | Banks of all countries keep on remaining oddly |
| 4. Besides, B. Williams enumerates 5 "bullets" that | | | | passive. |
| can "kill" any trend -i.e., its reversal points (points | | | | 2. Otherwise, proceeding from these and |
| of reference). Starting from such points, one can | | | | hundreds of thousands of the analogous |
| develop new strategy and tactics of the work | | | | examples, we must admit that Forex is not a |
| within the trend. | | | | spontaneous, unpredictable and chaotic market |
| 5. B. Williams also recommends making a business | | | | any more. Now it is replaced by a market, |
| plan. In this "control list", one must clearly specify | | | | controlled by somebody. In terms of Financial |
| "the working rhythm", the signals from "the big | | | | Times and the journal "Currency profiteer |
| finger" concerning the deal opening, "stop-loss" | | | | (speculator)", this parent group (the organizer of |
| levels, cushion pads (suspension pillows), etc. | | | | Forex ), is called "Consortium". Below I use this |
| 6. As a professional psychotherapist and trader, B. | | | | term as well. Consortium is capable of the |
| Williams submits practical recommendations to the | | | | following:a). in a fraction of a second to reverse |
| beginners and skillful (competent) traders - see | | | | USD trend more than by thousand of points with |
| Chapters 11 and 12 from "Trading Chaos». | | | | respect to all national currencies of the world;b). |
| The essence of his attitude to traders' principal | | | | not to give any chance to National Banks of all |
| psychological problems can be approximately | | | | countries in the world to prevent the steep fall (or |
| formulated as the following. We learn how to | | | | rise) of their national currency rates with respect |
| integrate into the market basic structure and | | | | to USD. Surely, it is assumable that National Banks |
| establish contacts with the market via realizing our | | | | closely collaborate with this Consortium. However, |
| own prejudices and by the development of our | | | | in this context another statement is important. |
| individual trading programs. You should compare | | | | That is, USD rate reversal occurs simultaneously |
| this approach with other psychoanalysts' | | | | with respect to exchange rates of all national |
| viewpoints. Such "specialists" try to make money | | | | currencies. However, it looks rather dubious that |
| at Forex market rather incompetently (see | | | | this very day wishes of all National Banks' |
| Chapter 23, dedicated to traders' psychological | | | | suddenly coincided with the purposes of |
| problems that arise during the work at Forex and | | | | Consortium. Probably, another situation is more |
| methods of their "healing"). | | | | realistic. At least some of National Banks were |
| 7. As the logical continuation of "Trading Chaos", B. | | | | forced to obey Consortium's resolution - i.e., to |
| Williams has written another book - see "New | | | | reverse USD trend with respect to other |
| Dimensions in Exchange Trading". In this book, the | | | | currencies, their own included. |
| author presents his business approach - i.e., | | | | Thus, there emerges a completely different |
| Profitunity "via the web". | | | | model. One must not follow "the crowd" ("the |
| · He has introduced the indicators (AO, | | | | flock"), trading volumes and postponed orders at |
| AC and Alligator). Now they are regarded as the | | | | Forex. Giving analysis to a series of factors (the |
| obligatory) components of the majority of Forex | | | | trading volume included), it is necessary to |
| trading systems. | | | | understand the interests and aims of those who |
| · He tried to "specify (detect) all market | | | | give quotations at Forex. Our goal is "to trade |
| signals" and open deals at the moment when such | | | | together with those individuals". Very often it is |
| signals coincide simultaneously, which must be | | | | against the "crowd" and "volume" of transactions |
| confirmed by different indicators. | | | | opened by traders. It is illustrated by the example |
| I would like to keep on complimenting B. Williams | | | | of the charts on April 1, 2005. |
| for his accomplishments and contribution to Forex | | | | Let's dwell on the difference between the goals |
| theory but for "one snag to it". Several years ago | | | | of Organizer and common participants of any of |
| I started to reflect on certain aspects of B. | | | | financial games. |
| William's theory. That is, as a rule, 95-97% of | | | | Imagine yourself in the position of an organizer of |
| traders had lost at Forex before the edition of | | | | any financial game, the game of " Forex " |
| "Trade Chaos 1, -2" and "New dimensions". At the | | | | included. In the shoes of Organizer, first of all you |
| same time, notwithstanding all achievements and | | | | must determine your goals and principles, opposite |
| discoveries by B. Williams, the number of traders | | | | to those of other participants of this "game". |
| -losers still remains the same even after the | | | | 1. For the game organizer it is to gain profit |
| editing of these books. | | | | regularly and stably. |
| This circumstance forced me to scrutinize many | | | | 2. For this purpose, Organizer tries to establish the |
| of B. William's positions more impartially and in | | | | game rules as simple and "impartial" as possible. |
| detail. I have cardinally reconsidered my views on | | | | His goal is to make this game attractive for all |
| the trading at Forex. | | | | other participants. In this way Organizer collects a |
| As I see it, one must clearly distinguish domains | | | | large audience of traders, independently of their |
| where techniques by B. William's and other | | | | age, profession and other differences between |
| authors are applicable and where they do not | | | | them. |
| work but only accelerate the process of losing | | | | And now one should look at the familiar aspects |
| money by a trader. Only after having learned how | | | | from this viewpoint.a). The fundamental and |
| to detect this boundary one can develop one's | | | | technical analysis; the army of |
| own trading system that will bring profits at | | | | economists-analysts and other "specialists" who |
| Forex. | | | | teach all participants to work at Forex "as all |
| Further, I try to submit my views on Forex | | | | do".b). The classical version of notions of the |
| market. Starting from the theory, I make a | | | | support and resistance levels (indicators, advisers, |
| transition to its practical application. In this way | | | | etc.), intended for placing all suspended orders and |
| one can better understand logic of the currency | | | | stop-losses approximately at the same points.c). |
| pair movement at Forex market. Consequently, | | | | An abundance of news and factors that influence |
| this approach helps us to trace out a general | | | | the currency quotation behavior. As the result, |
| pattern of opening and closing of transactions at | | | | one can readily explain the movement of any |
| Forex. | | | | currency pair in any way one likes - however, |
| CHANGES in FOREX MARKET. FOREX | | | | such explanations are submitted post factum. |
| CONTROLLABLE SYSTEM instead of CHAOTIC | | | | In case of logical gaps in "impartiality" of the |
| MARKET and ITS CONSEQUENCES for | | | | currency pair movement explanation after the |
| TRADER'S WORK | | | | issue of news, "foul (forbidden)" methods are |
| Previously Forex was a chaotic market. B. Williams | | | | always "at service". It is just impossible to refute |
| tried to find elements of a system, making use of | | | | this reasoning! There are the examples: "the |
| the theory of chaos. At present the system | | | | market is unpredictable", "the currency has |
| "tries to disguise its goals and plans" with the help | | | | already finished "working for" the given news |
| of a superficially chaotic character of movements | | | | before its publication", "the participants have |
| in this market. | | | | noticed a negative aspect of the index high |
| As regards Consortium, the PRINCIPAL | | | | values, which for sure will manifest itself in |
| CONCLUSION that a trader must make after | | | | future", "an unknown clearing bank has placed an |
| reading this chapter is the following. This market | | | | order for buying a given currency in a large |
| has ceased to be spontaneous. Now it is | | | | amount - under the condition of the "bear" trend |
| organized and controllable. At present volumes of | | | | (when all trader stake on "sell")", etc. Can you |
| transactions, opened by traders, have ceased | | | | prove the opposite? Surely, you cannot. |
| being of great influence. Somebody's interest "to | | | | You should compare the behavior of the |
| push" a currency towards this or that direction | | | | controllable and spontaneous currency markets |
| has become much more important. Often this | | | | under the condition of force major. |
| interest aims at usurping an N- transaction volume | | | | Only the force major factor is totally |
| and a number of traders' orders. The primary goal | | | | unpredictable by Organizer. Such circumstances |
| has become to reverse all currency pairs into the | | | | impartially and clearly indicate the difference |
| opposite direction. This is why the currency often | | | | between the spontaneous and organized |
| "moves" against the volume, news and the | | | | (controllable) markets. |
| common sense. The charts on April 1, 2005 | | | | In any area, extremities always play the role of |
| perfectly illustrate these tendencies. I sincerely | | | | the moment of absolute truth. That is, such |
| hope that everybody sees that these graphs do | | | | extreme situations indicate weak and strong |
| make exceptions but they don't confirm the rules | | | | points of any system. It relates to politicians' |
| of Forex. | | | | behavior at crucial periods in a State, to putting on |
| This is why the techniques of working at Forex, | | | | trial equipment and to the situation at the |
| written by those classicists who dealt with the | | | | currency market under force major |
| spontaneous market, will more and more diverge | | | | circumstances. |
| from the currency real (true) quotations. It is | | | | The Episode #1. The force major circumstances |
| necessary to mention that at the spontaneous | | | | in USA on September 11, 2001. There is the |
| market the direction of the trend and its intensity | | | | difference in the behavior of spontaneous and |
| coincide with the trading volume. At present the | | | | controllable money-markets. |
| base of Forex market is changed in its essence. | | | | Chart 8.5. EUR/USD pair movement (For view |
| Now it's being driven by INTEREST of a certain | | | | picture see notes in end of article) |
| grouping but not by spontaneous forces. This | | | | Chart 8.6. GBP/USD pair movement (For view |
| grouping prescribes the currency quotations to us | | | | picture see notes in end of article) |
| at the market. It is ready to reverse currency | | | | The results of trading at Forex on September 11, |
| pairs against any volume of traders' orders. | | | | 2001 ( Forexite Ltd.) are the following. The dollar |
| The reader should recall one of A. Elder's principal | | | | rate sweepingly fell as compared with the principal |
| ideas - this author is the classicist of the stock | | | | national currencies. EURO/USD rate increased |
| market technical analysis, a trader and the | | | | more than by 200 points (from 0.8965 up to |
| professional psychotherapist. He states that the | | | | 0.99167). GBP/USD rate increased more than by |
| market is being driven by a crowd (flock), which | | | | 210 points (from 1.4559 up to 1.4773). USD/JPY |
| opens the deals towards one direction. This results | | | | rate fell almost by 330 points (from 121.84 down |
| in the trade formation. | | | | to 118.58). |
| It is justified when one deals with the chaotic | | | | The reason for drop in USD rate was the |
| market. | | | | terrorists' attacks on New-York and Washington. |
| But what does happen at Forex market at | | | | According to news agencies, terrorists had had |
| present? | | | | high-jacked passenger planes. The latter were |
| Let us again return to the example of USD trend | | | | directed at Trading Center in New-York and |
| reversal from the "bear" type to "bull" one. | | | | Department of Defense (Pentagon) in Washington. |
| The charts on April 1, 2005 are depicted below. | | | | The planes had fallen down, which caused the |
| Chart 8.1. EUR/USD movement (For view picture | | | | subsequent conflagration and collapse of Trading |
| see notes in end of article) | | | | Center two sky-scrapers. As the result, the |
| Chart 8.2. GBP/USD pair movement. (For view | | | | trading at New-York Stock Exchange did not take |
| picture see notes in end of article) | | | | place that day. It was suspended for a not fixed |
| Let us scrutinize GBP/USD pair behavior on April | | | | period of time. |
| 1, 2005 after issuing of positive data on GBP and | | | | The events in USA stimulated the drastic |
| negative ones concerning USA economics. During | | | | strengthening of CHF rate. In American session |
| March, in Great Britain CIPS manufacturing index | | | | USD/CHF rate fell more than by 530 points (from |
| made 52.0 (the previous value had been | | | | 1.6895 down to 1.6365). EURO/CHF rate fell more |
| reconsidered from 51.8 down to 51.6). In New | | | | than by 200 points and came down lower than |
| York, the oil price heightened by $ 2.40 - up to $ | | | | the level of the strong psychological support - 1.5 |
| 57.70 per barrel. It was the new record-breaking | | | | CHF for 1 EURO - to the point 1.4950. The matter |
| high price in 21 years. During March in USA | | | | is that CHF is considered saving (salutary) |
| Nonfarm payrolls were minimal to start from July | | | | currency under the conditions of various world |
| of the previous year. Its previous value was | | | | crises. Consequently, investors were anxious to |
| revised towards its diminution. Michigan sentiment | | | | buy CHF as many as possible in such an uncertain |
| index was 92.6 in March (the forecast had been | | | | situation, induced by the act of terrorism in USA. |
| 92.9 - it had coincided with the previous value). All | | | | Do you get it? Panic captured the whole world - in |
| USA indexes had fallen down. | | | | the first place, USA itself. At the same time, USD |
| I hope you take on trust that at the same | | | | rate fell with respect to |
| moment all other currency pairs were adjusted | | | | - EURO by 2%; |
| for benefit of USD rate rise against other national | | | | - GBP by 1.47%; |
| currencies. Those who do not believe can check it | | | | - JPY by 2.7%. |
| - these data are public and open to general use. | | | | Now let us determine the real fall in USD rate all |
| There arise the questions. | | | | over the world. As the starting point we take |
| 1. Can traders all over the world open transactions | | | | Special Decision by National Bank of Ukraine. |
| in USD "bear" trend almost at the same moment | | | | The board of directors of National Bank of |
| (from M1 to H4 and D1). That is, under the | | | | Ukraine adopted the resolution, in accordance to |
| condition of the issue of negative news on USA | | | | which National Bank of Ukraine could fix a rate |
| economy, all traders simultaneously started to | | | | without taking into account demand and supply. |
| buy USD and sell all national currencies. | | | | After the act of terrorism in USA on September |
| Consequently, USD rate began to sky-rocket. | | | | 11, currency exchange centers in Ukraine raided |
| Clearly, this situation contradicts the news, logic | | | | USD buying rate from 5.25 down to 3.0-2.5 hrivnia |
| and common sense. | | | | (Ukrainian national money) per $1. USD selling rate |
| 2. One should pay attention to the synchronous | | | | was being maintained at 5, 35 hrivnia per $1. |
| character of motion of all national currency pairs. | | | | National Bank of Ukraine stipulated that USD |
| The difference in time makes from a fraction of | | | | exchange rate had not to deviate from the |
| a second to a minute. | | | | official rate more than by 10%. Only after |
| The charts on April 29, 2005 serve as another | | | | threatening to cancel the license to work at the |
| example. | | | | currency cash payments market (Available |
| Chart 8.3. EUR/USD pair movement (For view | | | | Funds), currency exchange centers return to |
| picture see notes in end of article) | | | | buying of USD in cash according to the rate that |
| Chart 8.4. GBP/USD pair movement (For view | | | | had been in force before September 11, 2001. |
| picture see notes in end of article) | | | | That is, in contrast to the controllable market, the |
| Analysts attract our attention to the following | | | | spontaneous one reacted to one day of the force |
| facts. In the European session EURO/USD pair | | | | major of September 11 by the double fall in USD |
| rate had increased up to the point 1.2976. In the | | | | rate and more! |
| American session it fell down to 1.2852, minimal to | | | | Thus, the difference between the reactions of |
| start from April 15. The rate fell more than by | | | | the currency exchange spontaneous and |
| 120 points. Analysts emphasize the fact that high | | | | controllable markets makes 50 times and more. |
| values of several other USA indices (CIPS and | | | | Is it a pure accident? Thus, it looks as at that day |
| Chicago PMI) pegged USD rate. | | | | the traders, one and all, deciding to stand by USD |
| In USA in March the personal income index was | | | | - so that in their transactions they did not stake |
| +0.5%. At the same time, the prognostication had | | | | on USD rate slump? Or, probably, some of |
| been +0.4%, which had coincided with the | | | | traders bought USD against other national |
| previous value. In USA in March the personal | | | | currencies, even not knowing whether USA |
| spending index made +0.6%. The prognostication | | | | economics will retain the leading positions in the |
| and the previous value had been +0.5% and | | | | world or it will level with undeveloped countries |
| +0.7%, respectively. In April Chicago PMI made | | | | (e.g., such as Ukraine). Is it possible? You just |
| 65.6. The prognostication had been 63.0, whereas | | | | imagine what would happen if another plane or |
| the prognostication and the previous value had | | | | two were fallen on reactors of nuclear power |
| had been 63.0 and 69.2, respectively. | | | | plants in USA so that the major part of America |
| As the consequence of this second "fortuitous" | | | | would turn into "Chernobyl zone"! |
| reversal of currencies, USD trend at H4 was | | | | |