Antiprofitunity Strategy - Key PrinciplesWednesday, 11 October 2017 05:00
This trading strategy is unique, since it combines the basics of countertrend trading. This approach is based on the theory of chaos and the works of Bill Williams.
At the end of the 20th century, Williams' classic approach brought a stable profit, but after the crisis the conditions of the currency exchange have changed. Developers of Antiprofitunity adapted Williams' methodology for new realities.
Fundamentals of Antiprofitunity Strategy
The trader enters the market against the trend, at the stage of dying, looking for a profit after the turn. The recommended timeframe is D1.
This tactic uses the regular Bill Williams’ tools installed in the MetaTrader terminal by default. The Alligator indicator is used to find the trend. We will also use the Awesome Oscillator (AO), which helps to estimate the trend, searching for a good opportunity to open a deal. The goal is to find the weak trend, as well as the safest point for opening the order in the direction of the trend, which is just beginning to form.
The price chart and AO form divergences, and this means a signal of a trend reversal. That's why this signal is the most important in this strategy. AO serves as a filter of signals, helping to get rid of the false candlestick patterns. At the same time, it’s necessary to find a signal candle with strictly defined properties.
When the trend begins to move in the right direction, you can follow the position with fractals, which helps to avoid losses at the stage of price deceleration.
Signal Candlestick in the Strategy
To enter the market, a signal candlestick should appear on the chart of the asset price. If an upward trend is presented on the market, this candle is called a bearish reversal. In case of a decreasing trend, this candle is called a bullish reversal. The probability of such a candle appearing on the chart grows depending on how long the trend lasts. It’s located at the peak of the upward trend, or at the minimal price of the downward trend. As mentioned above, this pattern must meet a number of requirements.
- The strength of the signal is proportional to the distance from the signal candlestick to the Alligator lines. The candlestick shouldn’t cross these lines nor touch them.
- According to the Strategy, the blue Alligator line and the direction of the trend should form an angle. A larger angle means a stronger signal, and vice versa. To estimate the angle, you can build a line from the point of intersection with the price chart to the closing price of the signal candlestick. The second line is built by the blue curve of the Alligator. If these lines are parallel to each other, or if the angle converges, this indicates a false signal.
- If a bullish reversal candlestick appears on a downward trend, this indicates a good opportunity to open a purchase. It’s necessary to open the pending order at a distance of several pips from the maximum of the candle.
- If a bearish reversal candle appears on the upward trend, this means the right moment to open a deal for sale. It’s necessary to open a pending order at a distance of several pips from this candle.
In this case Stop Loss orders are set in several pips from the minimum of the signal candle (for purchase), or in several pips from the maximum of the reversal candle (for sale).
All the positions are closed by triggering the Stop Loss orders.
Summary on Antiprofitunity Strategy
The main advantage of the described method is its universality. This trading strategy can be applied on any currency pairs, as well as on other types of assets. It’s worth noting the simplicity of the method. You don’t need to search for rare indicators, since it’s enough to use the standard Bill Williams’ indicators installed in MetaTrader4 by default. Also you get the opportunity to spend less on the spread, as on the daily chart the difference between the Bid and Ask prices can be considered a minor uncertainty.
Obviously, any trading technique also has its drawbacks. In this case, we can note the absence of clear rules for closing the position. To simplify this task, you can set the closing rules for each traded pair. For example, on a EUR/USD pair, which is often flat, you can go out with a specified Take Profit order, and on a trend GBP/JPY pair - watch the intersection of the Alligator lines.
Antiprofitunity demonstrates flexibility in various market conditions, and allows you to effectively determine the critical points of overbought and oversold areas. It will be useful for all the traders who like methods of Bill Williams.