Like in any other business, take the best ones as your example to copy in trading. Larry Williams, the author of “Long-term secrets to short-term trading”, has been called “the world’s champion” among traders for a few past decades. Participating in contests, he managed to boost his deposit up to $1 million, which is certainly worth our respect and attention to the trading strategies he’s been using. They are simple and don’t require special skills.
What is Larry Williams’s channel trading?
The old ways are the best ways. The interest to classic technical analysis is reborn in the 21st century. Trading channels have become popular again. In contrast to the method where moving averages are built through extremums, Larry Williams used moving averages whose input parameter equalled three days. One of them was built through maximum prices and the other - through minimum prices. The result was a dynamic trading channel. A retracement from its upper and lower limits could be used for opening short and long positions, respectively. Breakout strategies shouldn’t be disregarded either. Much will depend on the closing price of the breakout bar.
Dynamic trading channel in the EUR/USD chart
In the second half of June, there appeared a combination, known as “bearish absorption” in the candlestick analysis, near the upper limit of the dynamic trading channel in the daily chart. The body of the last candle fully covered the previous candle’s body. One could open a trade at the closing price of the second bar and earn good money. A protective stop order needed to be placed at the fluctuation maximum. To control the trade and close it later, Trailing Stop was used.
Work strategy for Larry Williams’ channel
A signal to buy EUR/USD was given at the beginning of August when the bears failed to break out the lower limit of the trading channel. The quotes moved within the range. At the same time, there was formed a pin bar, in the terms of price action, and an upthrust under increased volumes, in the terms of VSA. It would be hard to imagine a better situation for opening a long position in EUR/USD from the level of the bar’s closure. A protective stop-order, like in the previous example, was supposed to be placed below the fluctuation minimum and above a psychologically important level of 1.1. Next, the situation developed in a bullish scenario.
So, if we add additional signals produced by other instruments of technical analysis to Larry Williams’ channel strategy, the efficiency of our trading system will increase. At the same time, the famous trader’s approach may be used both as a fully fledged strategy and a regular filter. The combination of classic and dynamic channels looks quite curious.
Trading channels in EUR/USD’s daily chart
A breakout of resistance’s descending line from below occurred in EUR/USD’s daily chart in August. The bears’ attempts to get the quotes back within the diagonal trading channel failed during the period of a few bars. The same happened in the case of the dynamic trading channel, which means this situation is favourable to opening long positions. A conservative approach implies opening a long position at the breakout of August’s maximum near 1.125; an aggressive approach - at the closure of the bar retracing from diagonal support.
So, we may conclude that famous traders’ time-proven strategies do work. Why not use them in our trading then?
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Price chart of EURUSD in real time mode
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