William's % R
Mr. Williams indicates that the essence of his trading system is based on interpreting readings of %R. He states that, "Generally speaking, readings below 95% give a buy indication - during bull markets. A reading above 10% gives a sell signal during bear markets." He goes on to say that "the %R index will not work if you insist on acting on the buy signals during a bear market." He emphasizes strongly the need to isolate the dominant trend - whether it is a bull or bear trend. Then he tracks price movements with %R and waits for the signals. (See his book, "How I made One Million Dollars... Last Year... Trading Commodities" by Larry R. Williams.)
To determine the long term trend for commodity or futures markets, Mr. Williams advocates the use of a 10-week moving average. The indicator is now popular in most markets and has proven itself useful with stocks.
Like other momentum indicators, Williams %R is not very useful in a sideways market, or trading range. The market needs to be trending up or down for the signals to be reliable.
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William's % R
Linear Mode
