Williams % R a magical indicator
There is really nothing magical about W%R; however, used effectively it can do
miracles to your trading account. The W%R is a basic indicator that compares the
current price with the last X number of days and displays the current price’s
position in percentage, I use the 20 setting (X=20).
Objectives of using the W%R:
Effective use of W%R helps me resolve the following most critical issue:
Determining which time frame/s will serve me best in viewing the market most
effectively. I specifically want to know which time frame will give me a definite
and dependable signal for the end of the current move (also the beginning of the
possible new trend).
The nature of the W%R
Because of its simple formula, the W%R just about always makes a very sharp
move on the first wave. It is logical because a first wave is (just about always) a
trend (fast price movement). Wave one (the first wave in a series of waves that
make up a trend) always follows a correction (slow price movement).
As far as the W%R is sketched, the first wave usually dictates the rhythm. What I
mean is that during the first wave, when price moves fast and makes new highs (or
lows), the W%R reflects that.
Because the first wave comes after a correction where price had moved relatively
slowly, the W%R has to move sharply from one extreme to the other; in fact it
must eventually (but rather quickly) reach the new extreme. As the trend
continues, the W%R usually stays around the upper extreme (above -40) during an
uptrend and around the lower extreme (below -60) during a downtrend. Price
remains in that zone until the trend is over; then it will once again move swiftly in
the opposite direction, to the opposite extreme.
In simple words, the W%R creates a unique pattern (when observed on the
‘correct’ time frame) for as long as the trend is in motion.
Here is an example of the current AUD JPY trend (July 4th, 2011). This is the H5
time frame which I selected as the ‘correct’ higher time frame. (When I will get a
signal from the W%R on this time frame, I will get out of my open long trades
The real value of this approach is that I get to know well in advance which time
frame will be of value to my trading efforts. At the moment, I know for a fact that
either the H5 or H6 will show me the end of the current wave/trend. A mere
correction is not likely to get the W%R under the -60.
See the second lesson
There is really nothing magical about W%R; however, used effectively it can do
miracles to your trading account. The W%R is a basic indicator that compares the
current price with the last X number of days and displays the current price’s
position in percentage, I use the 20 setting (X=20).
Objectives of using the W%R:
Effective use of W%R helps me resolve the following most critical issue:
Determining which time frame/s will serve me best in viewing the market most
effectively. I specifically want to know which time frame will give me a definite
and dependable signal for the end of the current move (also the beginning of the
possible new trend).
The nature of the W%R
Because of its simple formula, the W%R just about always makes a very sharp
move on the first wave. It is logical because a first wave is (just about always) a
trend (fast price movement). Wave one (the first wave in a series of waves that
make up a trend) always follows a correction (slow price movement).
As far as the W%R is sketched, the first wave usually dictates the rhythm. What I
mean is that during the first wave, when price moves fast and makes new highs (or
lows), the W%R reflects that.
Because the first wave comes after a correction where price had moved relatively
slowly, the W%R has to move sharply from one extreme to the other; in fact it
must eventually (but rather quickly) reach the new extreme. As the trend
continues, the W%R usually stays around the upper extreme (above -40) during an
uptrend and around the lower extreme (below -60) during a downtrend. Price
remains in that zone until the trend is over; then it will once again move swiftly in
the opposite direction, to the opposite extreme.
In simple words, the W%R creates a unique pattern (when observed on the
‘correct’ time frame) for as long as the trend is in motion.
Here is an example of the current AUD JPY trend (July 4th, 2011). This is the H5
time frame which I selected as the ‘correct’ higher time frame. (When I will get a
signal from the W%R on this time frame, I will get out of my open long trades
frame will be of value to my trading efforts. At the moment, I know for a fact that
either the H5 or H6 will show me the end of the current wave/trend. A mere
correction is not likely to get the W%R under the -60.
See the second lesson