Williams PercentR

Here is an example using it with the trend, Nasdaq weekly chart. When it hit -100 (3rd week of January) that was the entry signal to enter with the trend. You can see that it was a bit early, compared to the real bottom...



It also works nicely on sideways days as a counter trend signal you just have to know when to expect one...

 

Do you wait for the signal to be confirmed by a MACD or some other indicator before you enter?

 

Yes, but articles tend to present them as 100% right all the time indicators.

How much press would it get if it said "here's an indicator that isn't consistent"?

There's always the caveat of "it can help if you know how to filter blah blah blah" which is the BS catch. For this reason, the articles are basically useless.

 

No. One way to deal with the "earliness" is to enter in more steps, basicly averaging in....

 

The highest probability trades are in the direction of the trend. If you are using MACD to determine the trend, then you want to only go long when MACD is above it's moving average and short when MACD is below it's moving average. Therfore, waiting for MACD to signal a direction is your first step.

However, in an uptrend, rather than "chasing the market" by buying a new high, it is often best to wait for a retracement to "buy on weakness". In an uptrend, when %R is less than 20-30%, that would indicate that the market is "oversold" and that it is a retracement worthy of buying. In an uptrend, oscillators like %R tend to stay oversold for brief periods of time. There is no guarantee that price will not continue to go down, so stop losses are necessary.

In an uptrend, %R and other oscillators tend to stay overbought at the top end of the range for extended periods. Therefore, using oscillators to signal countertrend trades, even with bearish divergence, is quite risky.

See the attached chart illustrating the above explanations.

 

Yup, that's about how they do it in the magazines

 

Dr. Pepper,

1) Where do you recommend placing your stop loss?
2) When/where do you recommend taking profits?

Thanks

 

wast not it William Rennick who came up with Williams %R?

 

The stop loss is easy--below the prior swing low initially. However, after a few days of profit, I may trail my stop in several different ways.

Targets are harder. A lot of times I get stopped out with my trailing stop. I also use a method in this relatively obscure but good trading book that is similar to a 1:1 fib extension or Larry Williams' target shooter method:

http://ptt.50webs.com/index.html

 

MACD is one of the worst indicators imo.
Of all indicators it seems to get the most mention but is the most useless.
Maybe it works on something like an index but for stocks it is random.
IMO, you can't use MACD on a 10c stock and a $2 stock as they behave differently.
MACD will give the appearance of working but it's because you are looking at a trending stock. Soon as there is chop MACD is useless.
BTW, a trend is only seen on hindsight, just like Elliot Wave and nearly every other indicator.

Volatility is a better indicator I believe but that also has its limitations.
OBV is yet another but again limited in its use.