Notes on Williams Percent R Indicator

Overview

• The Williams Percent R indicator can be profitable if used correctly, but can lead to losses if misused.
• Traditional teaching of this indicator is often counterintuitive and flawed.

Traditional Misuse

• Commonly taught method:
  • Identify overbought (> -20) and oversold (< -80) levels.
  • Suggested actions:
    • Buy when oversold.
    • Sell when overbought.
• This approach is misleading; the terms "overbought" and "oversold" should be avoided as they can lead to losses.

Correct Usage

• Proper Focus:
  • Look for bullish or bearish strength in price action.
  • Wait for the indicator to exceed -20 to identify strength (considered overbought).
  • Engage in buying during strong bullish price action (above -20).
  • Conversely, when the indicator falls below -80, it indicates bearish strength, signaling to short.

Key Principles

• Trading often operates in a realm contrary to traditional beliefs ("opposite world").
• Classic technical analysis techniques may not be effective due to widespread knowledge and rapid information dissemination.
• Indicators should be interpreted correctly to trade effectively:
  • Price action strength is more crucial than merely obeying overbought/oversold signals.

Importance of Understanding Indicators

• Knowledge of what indicators mean enhances trading confidence and psychology.
• Stay in trades as long as indicators signal strength.
• Example: Market may remain strong while indicator shows overbought; selling in such a scenario can be detrimental.

Additional Tools

• The Williams Percent R indicator does not provide pinpoint entries.
• Use the cycle indicator for precise entry points (offered free at indicatorwebinar.com).
• Education behind indicators is critical for effective trading.