Incorrect. You can not compare indicator (values and patterns) on differrent commodities. If you do it of course you will fail. Just on ONE instrument and even there you need split it for bullish, bearish and chop periods. TraderZones, let me know ONE reason why ovebought/sold conditions should be same by all instruments.
OF course you can compare. The underlying instrument does not matter. All you get is a numeric value at each instance; that is the whole point: Developed by Larry Williams, Williams %R is a momentum indicator that works much like the Stochastic Oscillator. It is especially popular for measuring overbought and oversold levels. The scale ranges from 0 to -100 with readings from 0 to -20 considered overbought, and readings from -80 to -100 considered oversold. William %R, sometimes referred to as %R, shows the relationship of the close relative to the high-low range over a set period of time. The nearer the close is to the top of the range, the nearer to zero (higher) the indicator will be. The nearer the close is to the bottom of the range, the nearer to -100 (lower) the indicator will be. If the close equals the high of the high-low range, then the indicator will show 0 (the highest reading). If the close equals the low of the high-low range, then the result will be -100 (the lowest reading).
One of my favorite to use because: 1. It is actually early as compared to other indicators being lagging. 2. It is possible to use it without the price chart...
MACD is a fabulous indicator that can be used in a lot of different ways. However, I assume you are using it as a trend following indicator to trade in the direction of MACD crossing over it's moving average. If that is the case, then MACD and %R can be used together as a system. If you look at the attached chart, you can see that there is a downtrend from 12-4-09 to 1-5-10 indicated by MACD. If you went short during that time period each time %R was above 80%, with appropriate targets, you could have had 2 winning trades as shown with the red down arrows.
From what I have seen, and I am fairly new to this so I have not seen a lot, it appears that the MACD works better for some commodities than others (I've been burned a few times trying to rely on it). I can see how it appears to work well with the Williams %R. I am doing more position trading than swing trading, so I am also using COT data to see where the Producers, Consumers, and Funds are positioned. Still learning how to put it all together.
those indicators work nicely on little trendy charts like the pic posted. To be fair, most indicators work on those type of charts. As soon as you get a big trend (where the indicator will stay in the "overbought" or "oversold" area for extended periods of time) or a choppy day, you will lose more money than you make in the nice little trendy days where it works well.
IronFist, I'm not sure I follow you. If the indicator works to get you onboard, especially if it is the beginning of a big trend, then why would I care if the indicator stays in the overbought or oversold area? If I am on board (in the correct direction of the trend, of course), then at that point I am not so interested in what the indicators are saying. At that point, I go into position management mode, taking off partial profits to get myself into a no risk position as soon as possible, and then just let my remaining positions ride the trend. Knowing when to exit is something else that I am learning, as I have gotten out of trades too often on a pullback or a bounce, only to have the trend continue, but then I am on the sidelines.
You are assuming you got in at the beginning of the trend. The reason the indicators give people trouble is because, during that big uptrend, people will be saying "the indicator is overbought, time to short!" and start taking short positions only to get repeatedly stopped out as price keeps going up. And since you are assuming that you got in at the beginning of the big trend, the only way to be sure that you actually did is to take EVERY entry signal the indicator gives you (because it doesn't filter for "big trends only") since you never know when the next big trend is going to start. And taking every signal then puts you in the same situation as the guys I just described who are losing money during the big uptrend because the indicator, which is now overbought, is giving short signals continuously.
That's a good point and I think you are probably correct, if all you use is the Williams %R and/or MACD, but as we all know, there are no 100% right all the time indicators. Aren't we all just looking for what will give us an edge, and then after that it is just a numbers game (to a certain extent). Of course, how the trade is managed, once you are in it can make the difference between small profits and large profits.