SOME OF MY THOUGHTS ABOUT "TRADING CHAOS" by BILL WILLIAMS AS APPLIED TO THE EUR/USD CURRENCY PAIR

CHAOS

Chaotic structure and organization ( I know that sounds like an oxymoron :) but I am refering to market flow) in the Eur/Usd has been attempted to be described and revealed in numerous ways, witness the great variety of trading strategies of which traders can avail themselves.

One of the approaches that I think warrants merit is Elliot Wave Theory. My understanding is that it defines the structure of the market by acknowledging it's inherent chaotic principals and revealing the recurrent patterns within patterns within patterns that chaos theory is so adept at describing. Although I find the theory of Elliot Waves to ring true, I find the practical application of it to be a bit too esoteric and tedious for my liking.

However, all is not lost. As far as I can tell "Trading Chaos" is Bill Williams way of saying "Elliot Wave" ( if I remember correctly, that is what he says in his books). Better yet, it is his way of saying "Elliot Wave Simplified" and I'm all about simplicity when it comes to trading.......... so is Trading Chaos simple?

TRADING CHAOS

Trading Chaos is an aggressive trend trading approach. Make no mistake about that. With it's multiple entry methodologies it is meant to put you into a developing trend (impulse move) and carry you through the length of it in an aggressive manner. When talking about other markets, Williams states that the goal is to bank 3 to 5 times the actual value of the impulse move. In Forex this can often be considerably more. This aggressive approach may at times require a rather strong stomach. However, having said that, in my humble opinion, pretty well every trader should have a solid trend trading strategy that they feel suits them. I personally like Williams methodologies and have adapted them and continue to adapt them to suit myself.

Most often when traders think of trend trading strategies they think long term time frames and although they are not wrong in doing so that is only part of the story. My prefered time frame to look for trends in the Eur/Usd pair is the 1 day timeframe. However, trends occur in all time frames and that is the other part of the story.

I find that uptrends and downtrends that develop in the Daily timeframe are often a real pleasure to trade using Trading Chaos methodologies. We all know though that trends don't last forever and that there can be some considerable time between them. When a ranging or sideways trading market develops in the Daily timeframe then that timeframe is temporarily no longer suited to trend trading. But, a good trend trading approach should be able hold its own in varying market conditions. I find that if I identify a trading range in the daily timeframe then that very same trading range will often manifest itself as a series of smaller trends in a lower time frame. This is the beauty of those patterns within patterns that Chaos Theory defines so well. 
Although it requires a bit more nimble trading, ranging markets can submit themselves to giving up a few pips here and there on what are lesser degree impulse waves. So in theory at least, it should be possible to follow the ebb and flow of the market by using an approppriate timeframe for the particular prevailing market condition. If I decide to trade a lower timeframe, my own preference is to use anywhere from a 4 hour to a 30 minute timeframe. I find timeframes lower than that to have too much "noise" to my liking and being the basically lazy trader that I am, require too much screen time. Like I said, I really love those Daily's - a couple of minutes a day and presto... your done - it probably doesn't get more easy peasey than that. I am all for living a life away from the screen if I can. Being the lazy sot that I am I will also often just wait out a ranging market and forget about the lower time frames. I am quite happy to let someone else have those pips and then be prepared for the next daily impulse wave.