We study the features of the channel strategy of Larry Williams

As in any business, the most correct decision in trading is to take an example from the best. Over the past few decades, Larry Williams, author of The Long-Term Trading Short-Term Trading, has been called the world champion among traders. Participating in competitions, he managed several times to disperse his deposit to $ 1 million, which inspires respect and allows you to pay increased attention to the trading strategies used by this person. They are simple and do not require special training.

Everything new is well forgotten old. In the 21st century, interest in classical technical analysis is reviving. Trading channels are once again popular. In contrast to the methodology for constructing them using extrema, Larry Williams used moving averages with an input parameter of three days in his practice. One of them was built at the highest prices, the second – at the lowest. As a result, a dynamic trading channel appeared on the chart of the financial instrument, the rebound from the upper border of which could be used to open short positions, from the lower one – to form long positions. Breakdown strategies should also not be ruled out. Much will depend on the closing price of the breakout bar.

Dynamic trading channel on the EUR / USD chart  

In the second half of July, a combination appeared on the daily chart near the upper border of the dynamic trading channel, known in the candlestick analysis as a “bearish” takeover. The body of the last candle completely blocked the body of the previous one. Opening a position at the closing price of the second bar of the model made it possible to earn good money. A protective stop order should be placed at the maximum of the fluctuation, a trailing stop was used to control the deal and then close the short.

Larry Williams Channel Strategies

The signal to buy EUR / USD rose in early August when the attempt by the “bears” to break through the lower border of the trading channel was unsuccessful: quotes of the pair returned to its limits. At the same time, a pin bar was formed in the language of price action and an up-trust for increased volumes in the language of VSA analysis. It was difficult to imagine the best situation for opening a long position in the euro against the US dollar from the closing level of the bar. A protective stop order, by analogy with the previous example, made sense to place below the minimum fluctuations just above the psychologically important mark of 1.1. In the future, the situation developed according to the “bulls” scenario.

Thus, if the channel strategy of Larry Williams is supplemented by signals supplied by other tools of technical analysis, the effectiveness of the trading system increases. Moreover, the approach of a well-known trader can be used both independently and as a regular filter. A rather curious combination of classical and dynamic channels seems to be.

Trading channels on the daily chart EUR / USD

On the daily EUR / USD chart in August, there was a breakdown of the downward resistance line from the bottom up. Attempts by the “bears” to return quotes within the diagonal trading channel for several bars were unsuccessful. The same thing happened in the case of a dynamic trading channel, which allows us to consider the current situation as favorable for opening long positions. A conservative approach provides for the formation of a long at the breakthrough of the August maximum near 1.125, aggressive – to close the rebound bar from diagonal support.

Thus, the strategies tested by time and famous traders work. Why not use them in your trading practice?

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