While discussing the Profitunity systems, the name of a famous personality Bill Williams comes automatically. He is a master in trading psychology. He is famous for his technical analytical theories in the stock, commodities and forex market. In the Profitunity trading system, there are certain steps and techniques which will discuss in this article. Certain Profitunity indicators are included in this trading system. Hence, without taking further time let’s step into the main discussion.
Mr. William’s Profitunity or Chaos is a unique and popular theory that he has formed by combining trading psychology. According to him, trading and investment are somehow determined by human psychology. Traders should follow and analyze the real market situation. Trading is a psychological game rather than mathematical. Self-knowledge and understanding are the keys to success in the stock market.
What is the Profitunity trading system?
As I have stated above, there is a set of Profitunity indicators that helps to execute the trades in the stock market with much accuracy. There are specific tradings rules which are described below:
On the chart applying tools are as follows:
- Awesome Oscillator(AO)
- Acceleration Oscillator (AC)
Let’s start with the Alligator tool.
Alligator basically works for monitoring the market trend. There are three parts to it, Jaw, Teeth, and Lips. Jaw (Blue Line) is a 13 periods SMA (Simple Moving Average) with a future offset of 8 bars. Teeth (Red Line) is an 8 periods SMA (Simple Moving Average) with a future offset of 5 bars. And Lips (Green Line) is a 5 periods SMA (Simple Moving Average) with a future offset of 3 bars.
This is a five-bar sequences where the middle bar has the highest high/ lowest low. It is preceded by two lower highs and is followed by two lower highs.
Awesome Oscillator (AO)
In it, there is a difference between the 34 and 5 periods SMA (Simple Moving Average) of the midpoint of the bar (H+L)/2. This oscillates above and below a zero line.
Acceleration Oscillator (AC)
In MetaTrader 4 Acceleration/Deceleration Oscillator histogram is the difference between 5/34 momentum histogram (AO or Awesome Oscillator). There is also a 5 bar SMA (Simple Moving Average) on the Awesome Oscillator.
How to trade the Profitunity Trading System?
Profitunity Trading System Entry
When the Alligator lines are open, in trend direction, put a buy stop one point above the recent fractal outside of the lines. the lines.
Profitunity Trading System Exit
When Alligators are closing, traders are closing too. Just stay out of the market while lines are intertwining.
Profitunity Trading System Adding to positions or Pyramiding
We can take any signal in that direction after the first fractal is taken.
Adding Entry Signals
When AO cross line zero from negative to a positive value, we go long. It short in the opposite scenario.
When there are 3 consecutive AO bars above zero line and the last two having higher highs, we go long. Sometimes, AO pulls back for a while.
After three consecutive green bars, below zero line go long. In the case of short, the reverse of the long scenario happens. After three consecutive red bars above zero line short sell.
What are the 3 Wise Men Signals in the Profitunity Trading System?
The First Wise Man
We have already discussed about this in our Alligator indicator post. When the price is trading way below the Alligator, we will look for a bullish divergent bar. A bullish divergent bar is a bar having lower low than the previous bar and closing in its top 50%. We will enter a long if the high of the bullish divergent bar is broken. We will keep a stop loss below the low of the bullish divergent bar.
Similarly, when the price is trading way below the Alligator, we will look for a bearish divergent bar. A bearish divergent bar is a bar having higher high than the previous bar and closing in its bottom 50%. We will enter a short if the low of the bearish divergent bar is broken. We will keep a stop loss above the high of the bearish divergent bar.
The Second Wise Man
The second wise man signal is related to the Awesome Oscillator. It comes after a first wise man signal. In case we are in a first wise man long trade if the Awesome Oscillator prints 3 consecutive green bars that is the signal bar. If the high of that signal bar breaks that is a second wise man long entry. The stop loss will be kept below the low of the first wise man divergent bar low.
Similarly, in case we are in a first wise man short trade if the Awesome Oscillator prints 3 consecutive red bars that is the signal bar. If the low of that signal bar breaks that is a second wise man short entry. The stop loss will be kept above the high of the first wise man divergent bar high.
The Third Wise Man
This is the last of the 3 wise men signals. It comes after a first wise man and a second wise man signal. If the price crosses a fractal above the Alligator for the first time, it is a third wise man long signal. The stop loss will be below the first wise man divergent bar.
Similarly, if the price crosses a fractal below the Alligator for the first time, it is a third wise man short sell signal. The stop loss will be above the first wise man divergent bar.
Download Profitunity Trading System for MT4
Here, we have given the following link by which you can FREEly download and use Profitunity and templates for MT4 (Metatrader). This is far better than the default Bill Williams indicators.
Once you attach the indicator to your Metatrader charts, you will get to see the Profitunity Trading System in real-time on Metatrader (MT4).
Regarding Bill Williams and his techniques, I suggest to read the following book. Traders Troubleshooting Tools: A Collection of Aphorisms, Quotes and Trading Tips.
The Profitunity Trading System is a complete trading system with a set of indicators. The system has a defined entry and exit rules and we can trade this mechanically. The system also has money management rules inbuilt.