Larry Williams Trading Strategy | Notable Techniques

Markets can go through different seasons that repeat themselves over time, and research can provide valuable data for more in-depth asset analysis. Larry Williams has left some techniques to go deeper into the causes of market movements. In this article, we will delve deep into his notable techniques and teachings, understanding how this can benefit trading cryptocurrency markets.

Larry Williams Fundamental Trading Techniques

Although Larry Williams is recognized as a prominent technical analyst, his strategic approach to the market relies not solely on technical aspects but on fundamentals.

He built an avant-garde framework across various data that serve as indicators that address the internal factors affecting asset price movements.

From these indicators, we can point out the following techniques:

Inter-market Correlations:

This refers to analyzing the relationship between multiple assets and their market conditions.

In the case of Larry Williams trading, he would analyze:

• Bonds
• Stocks
• Metals
• Commodities.

Crypto traders can analyze:

• Crypto Networks.
• Blockchain Utility.
• Bitcoin Dominance
• Altcoins Market Capitalization.

Long-Term Market Patterns Analysis

It is about establishing a coherent association throughout the different seasons that the markets go through. Larry Williams would address the annual and monthly patterns related to holidays, elections, tax, quarter revenues, etc.

For instance, in the stock market, there are the following seasonal patterns:

• Tax time.
• 4th of July.
• September effect.
• Summer time.
• Thanksgiving.

The crypto market is also affected by some seasonal patterns since its appearance, as the following:

• The Bitcoin Halving: a reduction event in the reward miners obtain for supporting the BTC blockchain. It occurs on a 4-year cycle, and every cycle has caused a rise in the price of Bitcoin as a result of a decrease in the supply since the miners have less BTC to sell in the market, and there are fewer coins in circulation. This year, 2024, in April, Bitcoin completed its fourth halving, meaning that it is currently in this market cycle.
• Alt-season: This season occurs when Bitcoin dominance declines and the market capitalization is allocated to alternative cryptocurrencies, causing higher prices in the altcoins. The latest alt-season was in 2021, and the market sentiment forecasts a new one towards 2025.

Commitment Of Traders (COT)

Larry Williams was a pioneer trader in using COT data to disclose the market sentiment and how buyers and sellers distribute their positions in the market.

The COT data is tremendously convenient for anticipating and understanding the more complex phase of the market: the trend. That is why Larry Williams saw this data as a powerful indicator since he advocates for trend trading strategies.

This data calculates the open interest and net positions of all traders in the futures market. Specifically, the open interest analysis reflects the traders' preference for long or short positions, indicating the number of contracts held, hence the underlying demand or supply of a market.

For example, typically, a high open interest in the Bitcoin futures market indicates strong demand. Alongside this interpretation, crypto traders can also understand the market volatility, which can rapidly provoke overbought and oversold conditions over the asset.

In the Larry Williams approach, he would use his own indicator, the Williams Percent Range (%R), to detect those overbought and oversold levels.

The Role Of Larry Williams Indicators: Comparative Table

Understanding the Multi-Time Frame Strategy

By taking the idea behind the Ultimate Oscillator of Larry Williams, we can explore the essence of his framework and how he assembles a strategy based on three primary timeframes:

1. The long-term.
2. Intermediate
3. The short-term.

As he would state, to bring long-term order from short-term chaos, each time frame serves a specific purpose:

Primary Timeframe Analysis: 

Identify the all-around market trend. It helps traders see the significant movement, detecting key support and resistance levels, actual trend direction, and potential reversal points. This could be in a daily or weekly chart.

Intermediate Timeframe Analysis: 

This timeframe offers a broader but also detailed view of price action. It helps in identifying pullbacks during a trend from a bigger perspective for a mid-term approach and, at the same time, provides broader insights for short-term analysis. This could be in a 4-hour, 8-hour or 12-hour chart.

Short-Term Timeframe Analysis: 

This enables traders to follow short-term market fluctuations and pursue an edge over smaller price movements. It is crucial for timing entry and exit points and accurate execution within the trend context. 1-hour charts and fewer (30min, 15min, 5min).

Getting Out Of A Trade: The Key To Money Management

The following techniques belong to the ‘Oops’ exit strategy.

Bailout’ Exit

This technique is based on the opening of markets. However, crypto markets do not open or close, but as more institutions adopt cryptos, traders can time the session opening across Asia, Europe, and America trading schedules.

In this sense, according to Larry Williams:

• Close a trade position at the first open if it is already profitable: If you have a profit on an open trade, you get out at that open.
• If you’re in a losing position, you hold (maintaining the appropriate stop-loss) and wait giving a chance for it to turn profitable at the next session open.

Number of Days

This is closing a position after a fixed number of day, for example:

• 3, 5, or 10 days.
• Establish a number of days as a systematic exit according to the asset's market analysis.

Wide Stops

Suitable for some, criticized by others. The truth is these stops keep traders' positions in the market a bit longer.

In crypto markets where volatility is very typical, a wide stop can be a technique to consider.

Conclusion

Throughout his techniques, Larry Williams has left an advanced approach compound in data study, seasonal patterns, and multi-timeframes analysis that provide traders with a deep and unique comprehension of the market structures, elevating the status of simple concepts such as price action, support, resistance, and liquidity.

In Altrady, it is easy to pursue an edge over these techniques for the crypto markets with essential features and indicators. Sign up for a free trial account to start trading Larry Williams' teachings today.