Best Medium-Term Strategies: A Breakdown of Larry Williams’s Moving Average Strategy | R Blog RU


Larry Williams described this strategy in his book “Long-Term Secrets of Short-Term Trading”. It can be traded both in the Forex market and in other financial markets. But with timeframes, the situation is somewhat more complicated. Technically, the strategy is suitable for trading on periods from M1 to MN, but since no more than one candle can pass from opening to closing a position, it can be absolutely unprofitable to trade on it on small timeframes due to the spread if it is fixed, like it happens in the Forex market.

Larry Williams’ trading strategy desktop

Explication of the desktop

Explication of the desktop:

  1. A moving average constructed using the Simple method based on High prices.
  2. Moving average constructed using the Simple method based on Low prices.
  3. Local maximums of the Moving Average, built using the Simple method based on High prices.
  4. Local minimums of the Moving Average, built using the Simple method based on Low prices.

As a result, we get a channel in which we will work according to a certain algorithm in the direction of the prevailing trend. And the prevailing trend is considered to be the one towards which the last update of the local extrema of the Moving Averages was: if there was an update of the local maximums, then the trend is considered upward, and if there was an update of the local minima, then the trend is considered to be downward.

Buy signals by strategy

Larry Williams offers the following conditions for buying: if the trend in the market is upward, then you need to open a position when the price touches the Moving Average, built using the Simple method at Low prices, and close the position at the next touch of the Moving Average, built using the Simple method at High prices. As soon as one transaction is completed, you can make a second one. And so on until the trend changes from upward to downward. If a buy signal coincided with a trend change, then such a signal should be skipped. And start buying only when the trend is up again.

Example of buy signals:

Example of buy signals
Example of buy signals

Please note that the image shows a number of buy opportunities, but do not forget that only one position should be opened, only after the closure of which you can buy again.

Sell ​​signals by strategy

In order to be able to sell, the dominant trend in the market must be a downtrend. You should sell at the very first touch of the Moving Average built by the Simple method at the High prices. To close the position, respectively, the next time the price touches the Moving Average, built using the Simple method based on Low prices. As soon as one deal is closed, you can make the next one using the same algorithm. If a sell signal coincided with the fulfillment of the conditions for a trend change from downtrend to upward, then such a sell should be skipped. And start selling only when the trend is down again.

Example of sell signals:

Example of Sell Signals
Example of Sell Signals

It is important not to forget that only one position should be opened, only after the closure of which it is possible to open the next sell position.

Stop Loss and Take Profit in Larry Williams’ Moving Average Trading Strategy

Stop Loss is not set in this trading strategy. At least the author does not write anything about this in his book. The role of Stop Loss is played by the conditions under which the trend changes and the opposite signal to enter appears. That is, suppose that you are in an uptrend and have opened a long position when the price touches the level of the Moving Average, plotted by the Simple method based on Low prices, but the trend has changed to a downtrend. Then you can close your long position at the first sell signal, for which the price must touch the level of the Moving Average, built by the Simple method at the High prices.

Take Profit in this strategy is not set in the same way as Stop Loss.

Money Management in L. Williams’ Trading Strategy

If we take into account that we do not have Stop Loss, then it is worth trading, focusing on a certain lot size, since risking a hard percentage of the deposit will not work due to the peculiarities of the trading strategy.

An example of trading according to the Larry Williams strategy

An example of trading according to the Larry Williams strategy
An example of trading according to the Larry Williams strategy

Note that all trades in this segment could have been closed with a plus! That is, we can safely say that this trading strategy can be as profitable as it is simple. The main thing is to set a sufficiently long time period of the chart so that all the profit remains for you, and is not eaten up by the spread and commissions.

The only drawback of Larry Williams’ trading strategy is that you need to constantly be at the trading terminal in order to close both a profitable and a losing trade on time. But considering how long a succession can be, it’s worth it.


Libertex [CPS] WW

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