The Strategy That Made Him $1.1 Million In 12 Months

Summary

In this video, the presenter reveals the Lw Volatility Breakout Strategy, a trading technique used by Larry Williams to turn $10,000 into $1.1 million in just 12 months. The strategy relies on the Donchian Channels indicator, customized for a 5-minute time frame, and incorporates two additional indicators—LWTI and volume—to filter out false signals. By setting specific conditions for entering long and short trades, traders can maximize their chances of success. A secret trick is also shared to avoid false breakouts near major support/resistance levels, enhancing the strategy's effectiveness.

Takeaways

• 😀 Larry Williams turned $10,000 into $1.1 million in 12 months with an 11,300% return using a specific trading strategy.
• 😀 The strategy used by Larry Williams is called the Lw Volatility Breakout, based on the Donchian Channels indicator.
• 😀 To set up the Donchian Channels, adjust the indicator length to 96 and use the 5-minute time frame for optimal results.
• 😀 The Donchian Channels indicator has three lines: middle (mean reversion), upper (resistance), and lower (support) bands.
• 😀 Breakouts above the upper band signal potential long trades, while breakouts below the lower band signal potential short trades.
• 😀 A common problem with this strategy is false breakouts during market consolidation, where the bands are too close together.
• 😀 To filter out false signals, the strategy incorporates two additional confirmation indicators: the LWTI and a volume indicator.
• 😀 The LWTI (Larry Williams' Large Trade Index) helps identify long-term trends, set to a period of 25 for the 5-minute time frame.
• 😀 The volume indicator helps confirm whether the breakout has sufficient momentum behind it by setting the moving average length to 30.
• 😀 For a valid long trade, price must touch the upper red line of the Donchian Channel, the LWTI must be green, and the volume must be above the moving average with green bars.
• 😀 For a valid short trade, price must touch the lower red line of the Donchian Channel, the LWTI must be red, and the volume must be above the moving average with red bars.
• 😀 The 'secret trick' is to avoid entering trades near major support or resistance levels, identified by checking a higher time frame (like the 1-hour chart) to filter low-probability trades.

Q & A

What is the Lw Volatility Breakout strategy and who created it?

The Lw Volatility Breakout strategy is a trading method developed by Larry Williams. It involves using the Donchian Channels indicator, along with two other indicators (LWTI and Volume), to identify high-quality trades with significant movement. Larry Williams used this strategy to turn $10,000 into $1.1 million in 12 months.

What is the Donchian Channels indicator, and how does it help in trading?

The Donchian Channels indicator plots three lines: the upper band, lower band, and the middle line. The middle line acts as a mean reversion point, while the upper and lower bands serve as support and resistance levels. Traders use these bands to spot potential breakout points where price could continue in the breakout direction.

Why is the 5-minute timeframe important for this strategy?

The 5-minute timeframe is specifically recommended for the Lw Volatility Breakout strategy because it aligns with the settings of the Donchian Channels indicator (length = 96). The strategy is designed for short-term, fast-moving trades that are more effective on smaller timeframes.

What role does the LWTI indicator play in this strategy?

The LWTI (Larry Williams Trade Index) helps confirm the trend direction. It is set to a period of 25 and a smoothing period of 20. The LWTI turns **green** to signal bullish momentum (long trades) and **red** to signal bearish momentum (short trades).

How does the Volume indicator contribute to the strategy?

The Volume indicator identifies whether there is sufficient market momentum for a trade. When volume is above its moving average and the bars are green (for long trades) or red (for short trades), it confirms that the market is not in consolidation and that there is enough volume for the trade to be valid.

What is the correct entry signal for a long trade?

For a long trade, the entry signal is when the price touches the **upper Donchian band**, the **LWTI** is **green**, and the **Volume** is above the moving average with green bars. All three conditions must be met before entering the trade.

How should the stop loss be placed in this strategy?

The stop loss is generally placed just below the **middle orange line** of the Donchian Channels. In cases where the gap between the upper band and middle line is large, the stop loss should be set at the most recent **swing low** to avoid a large loss.

What is the recommended risk-to-reward ratio for this strategy?

The recommended risk-to-reward ratio for each trade is **2:1**, meaning the take profit target should be twice the size of the stop loss. This helps ensure that winning trades will yield higher returns than losing trades.

What is the secret trick to improve the success rate of the strategy?

The secret trick is to avoid entering trades that are near **major support or resistance levels**. If the strategy's conditions are met but the trade is close to a strong support or resistance zone, it is better to skip the trade. Additionally, entering trades that break through key resistance levels can provide strong momentum.

Why should you use a higher timeframe (like 1 hour) to avoid false signals?

Using a higher timeframe like the 1-hour chart allows traders to identify significant **support** and **resistance levels** more clearly. Entering trades too close to these levels can lead to false breakouts, so avoiding such trades improves the strategy's reliability.