Bill Williams Chaos Theory and Indicators

The given indicators came into being by the strategy suggested by a legendary trader Billa Williams. Due to having a good understanding in the psychology of market he developed his own method of trading which is based on meanwhile using a rational approach to the analysis of the market and the irrational logic of chaos.
Williams rejected the science of chaos: Chaos - this is the higher degree of order, where the organizing system is based on random and chaotic events.
B. Williams argued that price movement is random and unpredictable which cause chaos in financial markets. In his theory of Chaos, he rejects the linear method of trading, according to which future prices are forecasted depending on the analysis of the past. As a result of his investigations Williams came to the conclusion that standard indicators have limited capabilities because of their linearity.
To understand the overall structure of the market B. Williams advised to analyze the market through the following five dimensions:

  • Fractal (phase space)
  • The driving force (energy phase)
  • Acceleration / deceleration (power phase)
  • Zone ( combination of strength / power phase)
  • Balance Line
For understanding and analyzing these dimensions there have been established a number of indicators.