Bill Williams Profitunity

v10.3
Bill Williams Profitunity

Another method of studying Price and Volume by Bill Williams Profitunity

The Bill Williams Profitunity provides a unique way of quantifying price movement relative to volume. At the heart of it is the Market Facilatation Index (MFI). The MFI is the bar’s range (high – low) divided by the volume. Using the MFI, each bar has a mathematical relationship of the price activity versus the volume. In essence, the MFI is a measurement of market efficiency, tracking how much movement has occurred in price relative to volume. By comparing the MFI for the current bar to the previous bar’s, you can gauge the current bar’s ability to facilitate price to the previous bar’s ability. The Bill Williams Profitunity can be used on any period from daily bars to monthly bars.

The MFI as a stand-alone indicator has little value. However, by comparing the current bar’s MFI and volume with the previous bar’s MFI and volume, a very tradable system emerges.

Williams defines the four possible combinations of MFI and volume as follows. A plus sign means the current bar’s value is greater than the previous bar’s value. A minus sign means the current bar’s value is less than the previous bar’s value.

Volume MFI Label:

  • Green //Green
  • Fade //Blue
  • Fake //Red
  • Squat //Violet

Green. This bar shows an increase in volume and the MFI relative to the previous bar. Hence, there is price movement, and the MFI is larger for this bar than that for the previous bar. Further, more players are entering the market as signaled by the increase in volume. This activity in the futures market means that off-floor traders are very active. In addition, the price action is directional–that is, the market is moving in one direction due to the involvement of new traders putting on new positions. This is the kind of day that you would already want to have a trade on in the same direction.

Fade. This bar shows a decrease in volume and the MFI relative to the previous bar. The market has slowed and there is a minor amount of activity as indicated by the low volume. This type of day is called a fade, as the traders’ interest in the market by this point is fading. Often, this sort of day happens at the end of a trend. The market has simply reached a point where nobody is willing to establish any new positions. At this point the market appears to be suffering from a certain amount of boredom. Keep in mind, however, that out of this market condition, a new trend could emerge.

Fake. This bar shows a decrease in volume but an increase in the MFI. This condition means that the market is moving more relative to the previous bar (the greater MFI), but the lack of volume is evidence that there is no new participation. The price action may be driven by just the traders in the pit and is not attracting new players from the outside. Williams has an hypothesis, that the traders in the pit may be just strong enough to push the market to price levels where there are many stop orders resting in the hands of the brokers, hence faking out the off-floor traders.

Squat. This bar shows an increase in volume relative to the previous bar, but the MFI is lower. The increase in volume indicates heavy activity, but the decrease in the MFI indicates that the market is unable to make any real headway. Volume increased, the trend has stalled and the price movement has stopped. This price action usually, but not always occurs prior to an important move in the opposite direction. This type of bar is called a squat bar because the market appears to be squatting prior to a breakout. Often, the breakout of such a bar will indicate whether this squat is a trend reversal squat or a trend continuation squat.

 

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Risk disclosure:

No information on this site is investment advice or a solicitation to buy or sell any financial instrument. Past performance is not indicative of future results. Trading may expose you to risk of loss greater than your deposits and is only suitable for experienced investors who have sufficient financial means to bear such risk.

ProRealTime ITF files and other attachments : How to import ITF files into ProRealTime platform?

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  1. TAC Bolsa • 13 days ago #

    Improved version in the Blog
    https://www.tiburonesdealetacorta.com/2018/07/indicador-bill-williams-profitunity.html

  2. Real Pro • 12 days ago #

    Thanks for sharing this. I understand the 4 conditions, but can you explain the following please?

    – how is labelling above the bar different from below the bar?
    – what does a large arrow with no other labelling mean?

    Regards.

  3. Real Pro • 12 days ago #

    From the updated version, here is a screenshot. The first bar has “Green” text with a large purple up arrow. The second bar has “Green” text with a small green up arrow.

    • TAC Bolsa • 12 days ago #

      Sorry, it’s a file error.

      I have already uploaded a new File.

      https://www.tiburonesdealetacorta.com/2018/07/indicador-bill-williams-profitunity.html

  4. Real Pro • 11 days ago #

    Thank you; the new version looks better. I wonder if you’d mind explaining what it means when the arrow is above or below the candle?

    • TAC Bolsa • 11 days ago #

      Here you have the documentation of the indicator

      https://en.wikipedia.org/wiki/Market_facilitation_index

      https://www.tiburonesdealetacorta.com/search/label/Indicador%20Bill%20Williams%20Profitunity

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