Good Day,
Although I have seen several threads discussing Bill Williams indicators, I decided to automate his "Three Wise Men" strategy as outlined in his book "Trading Chaos - 2nd edition" mixed with few of my own thoughts.
Indicators used (standard MT4 indicators, all with default settings):
Although I have seen several threads discussing Bill Williams indicators, I decided to automate his "Three Wise Men" strategy as outlined in his book "Trading Chaos - 2nd edition" mixed with few of my own thoughts.
Indicators used (standard MT4 indicators, all with default settings):
- Alligator
- Awesome Oscillator (AO)
- Fractals
Definitions:
- BUDB : Bullish Divergent Bar
- Have a Lower Low than the previous bar, AND
- Must Close in the Upper Half of its range
- BEDB : Bearish Divergent Bar
- Have a Higher High than the previous bar, AND
- Must Close in the Lower Half of its range
- Angulation : I will use my own definition for angulation. I will consider an angulation is good if the distance between the High of a BUDB or the Low of a BEDB and the Alligator Lips is greater than the distance between the Alligator Lips and the Alligator Jaw.
3 wise men trading possibilities:
- Break Out of a valid Divergent Bar (Good Angulation and AO in opposite Color) - single entry
- Break Out of the third consecutive bar with AO color similar to 1st wise man trade direction - multiple entries
- Break Out of a completed Fractal in the trade direction - multiple entries
Long Entries :
Will be in type of Buy Stop Orders with user input buffer pips for entry and stop loss, as follows:
- Break Out of a (BUDB), stop loss at Low of BUDB
- Break Out of the third bar corresponding to the third AO Green Bar. This could generate multiple add-on entries, while trade is a live.
- Break Out of an UP fractal, in the direction of the trade. This could generate multiple add-on entries, while trade is a live.
Short Entries :
Will be in type of Sell Stop Orders with user input buffer pips for entry and stop loss, as follows:
- Break Out of a (BEDB), stop loss at High of BEDB
- Break Out of the third bar corresponding to the third AO Red Bar. This could generate multiple add-on entries, while trade is a live.
- Break Out of an DOWN fractal, in the direction of the trade. This could generate multiple add-on entries, while trade is a live
Exits :
- Either by hitting the initial Stop Loss (or the Trailing Stop Loss), or
- When an opposite Divergent Bar signal occurs (Close all and reverse)
Chart Example :
No guts, no glory