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Williams' Percent R Indicator
Description:
The Percent R indicator is an overbought/oversold
oscillator always based on the close. It is commonly used
as a tool to indicate when to buy on dips in a bull market
and when to sell on rallies in a bear market. Our Percent
R indicator is the inverse of Williams'. Our 40 is
Williams' 60, while Our 60 is Williams' 40. This was done
to
remain consistent with the standard practice that a high
number for an oscillator indicates that the market is
overbought, and a low number indicates that the market is
oversold.
Conventional Analysis:
Use Percent R to buy on dips when major trend is up. Use
Percent R to sell on rallies when major trend is down.
Additional Analysis:
Expect better results using Percent R, and many
overbought/oversold type indicators, in a non-trending
market than in a market with a clear and established
trend. Additionally, Percent R is best used to identify
tops in a bear market and
bottoms in a bull market, and can be expected to issue
false overbought signals in a bull market. In addition to
the current overbought/oversold status, consideration
should be given to the number of consecutive bars Percent
R spends in either overbought or oversold territory. A
higher number of consecutive bars at either extreme
increases both the likelihood of a move and the
probability that it will be a move of significant
magnitude.
Additional References:
Williams, Larry. How I Made $1,000,000 Last Year by
Trading Commodities. Windsor Books. New York. 1979.
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Technical Analysis Studies Available
You can adjust parameters of each indicator
to suit you.
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