So you bought when price was not overextended in the immediate term (approaching its MA) and as price was firming ("finding buyers")? And this is revelatory? Come on. How much did you pay for the book? Also, since you mentioned "Williams %R" you do realize that he simply appropriated (pilfered) George Lane's stochastic indicator, turned it upside down and put his own name on it, right?
Here's a portion of Chapter 6 from the above mentioned book with most of the redundant information redacted... you decide whether it's important or not. This chapter will perhaps, be the most interesting of all to you traders. The tools I am about to discuss may not have been brought to your attention previously. They will be profitable only if used in conjunction with the well-defined, major bull and bear market moves. Should you choose to use these indices on the sloppy, go-no-where markets, or markets that are not tightly locked in (where future direction is questionable) forget about their effectiveness. A WORD ON TECHNICAL THEORY Technical tools rely on daily price action as opposed to the underlying fundamentals. In view of this fact, one must be cognizant of the knowledge that such tools are subject to rapid and unforeseeable changes. The trader that changes with the tools will make money. The trader who gets trapped by a bad signal, but keeps hoping for the good one to re-materialize, will be hurt. All technical tools are subject to whip-saw action. All technical tools can be in error. Even my million dollar tools are wrong from time to time. But, by and large, they are correct and their performance is further improved when they are used for the well-defined markets. There are three basic approaches upon which all technical tools are based. The most common technical approach is a trend method. Then there's the momentum method, the over-sold/over-bought method, and finally, work based on the amount of accumulation and distribution taking place in the market. Trend approaches are most apt to give false signals and stunning losses. As a matter of fact, during the past two weeks' market activity, a commodity trend system (probably the most widely followed), lost 40% of their equity. In one day, their accounts were down over 17%! The trend approach works well in long term, sustainable trends. However, when trading ranges develop, any trading system (such as penetrations of any moving average, point and figure) will result in losses. To my knowledge, no one has yet constructed a profitable trend-following program that makes money every year. The essence of the problem is that trend systems cannot forecast which markets will have the long, sustainable moves that make trend following profitable. Trend systems do not forecast, they merely identify. THE PROFITABILITY OF MOMENTUM My concept of momentum, (bandied about by many other services, books, and brokerage firms) is based on measuring the speed at which prices advance and decline. Imagine, for a moment, a ball being tossed into the air. At some point, the very untrained eye can say the ball will now begin falling because we can see the speed of travel has begun to diminish. And so it is with commodities with the exception that it takes a highly trained eye to detect this loss of momentum toward either an up or down movement. To simplify, or define the speed, or rate of travel for prices, I devised the use of price rate-of-change about five years ago. My definition and tools for measuring speed are quite elementary. Compared to the machinations of my computerized predecessors, my methods are downright child's play. The momentum concept shown here will be as accurate as any of which I am aware. Best of all it's the simplest to maintain on a daily basis. Here's how it's done: HOW FAST ARE PRICES CHANGING? Finding out the rate at which a commodity's prices are changing is not difficult. It takes only a few seconds per commodity, and all you need is some paper and a couple of sharp pencils. Let's say, for example, that you wanted to construct a 25-day rate of change index for August 1972 pork-belly prices. To get today's index number, you subtract the closing price 25 days ago from today's closing price. If bellies closed at 38.44 then and 38.72 today, today's index number would be 38.72 minus 38.44 - or .28. (You always subtract 25 days ago from today. If bellies closed at 38.44 then and at 38.02 today, the index number would be - .38.) Tomorrow you would do the same, using tomorrow's closing price and that of 25 days earlier. That would give you your next index number. And so on. These index numbers are plotted chronologically above or below a "zero-line" on a graph with an appropriate scale. They are then connected with a solid line, as shown on the bottom of the accompanying chart for August '72 bellies, to form a momentum curve. TIME PERIOD IMPORTANT It was not by chance that 25 days was used in the example above. Most commodities exhibit some degree of cyclical price behavior. The momentum principle works better when an effort is made to match the time period used to the harmonies of the particular market concerned. In pork bellies, the cycle — the number of days from bottom to bottom - is about 50. Therefore, 25 days — or one-half of the cycle's time span - was chosen as the basis for calculating our rate-of-change or momentum index. THE MARKETS' MOST IMPORTANT TECHNICAL ASPECT For my money, the technical theory of most value and validity is the concept of overbought/oversold. This theory, or concept, is indeed the basis for all life and all thought. Let's turn our attention to nature, or the human body, to get a better grasp of this, the most important technical concept. My observation of market action has revealed to me that just as a condition of price imbalance appears to be a one way street, the opposite force takes over. What looked like a sure thing is soon falling out of bed. That's why traders who buy on break outs don't last very long. A break out condition usually occurs at the tail end of a move when buyers are in almost total domination of sellers. That condition, according to Yin and Yang, can't last long. I'm certain you've seen what I'm talking about. As sellers become so strong, so certain of themselves, they must be defeated as buyers rise up to take advantage of the imbalance. Perhaps the key to technical study is understanding balance and imbalance. I have done some work along those lines that has been encouraging but not quite enough to report to you at this time. HOW TO TELL WHEN A COMMODITY IS OVERSOLD I'll refer to the index as % of R, or %R. The index is a simple measure of where today's closing price fits within the total Range of the last ten days. Let's say the range for the last ten days was ten points, with the highest high of the last ten days at 65, and the lowest low of the last ten days at 55. Today's closing price is 58. As you can see from the illustration the close is quite low, within context of the total range during the last ten days. In terms of percentages, the close at 58 represents a figure that is 70% of the total range. Should the commodity have closed at 55, the % would be 100%. That is, the close is 100% of the distance from the top of the range to the close. If prices had closed at 65, the % reading would have been 0 because the distance from the close is 0% of the distance from the high to the close. The exact formula for arriving at %R is first to determine the distance from the highest high of the past ten days and the lowest low of the last ten days. This is the "Range". Then, take the difference from the high of the last ten days, which you have already identified, and today's closing price. We'll call this "Change". All that's left to do is divide the Change figure by the Range figure and you will arrive at what % today's price is — out of the last ten day's range. It's as simple as that. Here's an example. Let's say Silver had a high of 280.5 the last ten days and a low of 272.5. Today's close is 278.5. The Range (high to low) is 80. The Change (today's close to 10 day high) is 20. When we divide 20 by 80 we arrive at what % today's closing level represents of the total ten day range. In this case, the %R reading is 25%. Plot this daily reading on your chart paper. It will, naturally, range from a Yang, (overbought reading at 0%) to Yin, (an oversold reading at 100%). Generally speaking, readings below 95% give a buy indication - during bull markets. A reading above 10% gives a sell signal during bear markets. The preceeding paragraph is the essence of my technical system. The %R index will not work if you insist on acting on the buy signals during a bear market. Now you realize why I have, in earlier chapters, stressed so strongly, the necessity of isolating the dominant bull and bear markets. Once you've done that, all you have to do is track price movements with %R and wait for the signals telling you it's time to start positioning the commodity according to the fundamental situation we have discussed. TIMING YOUR SILVER TRADES Here's a chart of December Silver starting on November 17, 1972 through November 1, 1973. During this period, silver was in a well-identified bull market as I repeatedly indicated in my advisory service at the time. This means our interest in the %R index was strictly on the buy side. The signals we would "work" were those given by %R dropping below 95%. In total, eight signals were given. All predicted immediate rallies of at least a full cent. That's a $1,000 profit per contract. There is one "bad" period which I've been careful to mark on this chart. This is an example of when %R signals can go haywire. This is the only screening you have to make on a buy signal in a bull market. If prices have recently undergone an extremely rapid rise, exhibiting signs of a technical blow-off, (that means prices will stage a wild, upside move then immediately limit down without trading) wait for a buy signal from the %R Index. You are through waiting and ready to buy, when: %R has hit 100%, Five trading days have passed since the 100% reading was hit, %R again falls below 95%. Once those three criteria are met, it's time to once again begin acting on the %R signals, assuming you are buying long in a bull market.
I should just mention that ya don't need to be a genius, nor do you need Williams %R, to know that in a strong BULL MARKET any pullback will be bought. And you should be buying pullbacks anyway.
Again, it's a no-brainer. Ya don't need any indicators in a strongly trending market. Even a monkey blindly throwing darts at the wall will be profitable.
Yes, I do know that very well. You can substitute the %K for the Williams %R. Where are all the million dollar calls on ET if it was all so easy, simple, and clear?
Now I ain't opposed to these types of oscillators, but the best way to measure momentum is by using the actual price, not these derivative of price. Do you also notice that he's applying trendlines on the oscillator? Why can't you do that on the price?
Coz Larry believes TA is all hokus pocus, even though a Month or so ago he was seeing a Head and Shoulders pattern on the SPX or something.
Child's play, eh? Then why wasn't he able to make any money during his 2004 Million-Dollar Challenge seminar in St. Croix? After all, he should have been able to read the market's pulse easily and applied the appropriate method to cash in, irrespective of how the market was behaving (trend, range, overbought, oversold). Or at least he should have been able to identify, and focus on, those markets that were then in tune with his million-dollar formula. I wish more of his Million-Dollar Challenge seminars had been written up.