Crypto Academy | Season 4 Week 4 - Homework Post for [@kouba01] | William % R Indicator

Hello Everyone, so today I invite you all to read today's Homework on William's % R Indicator subject which is given by Professor @kouba01.

So let us continue with our homework.

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Question no. 1
_{Explain the Williams %R indicator by introducing how it is calculated, how it works? And what is the best setting? With justification for your choice.}

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Williams %R indicator which is also known as the William Percentage Range. Williams %R indicator is an oscillator indicator that helps the traders in seeing the momentum of the market, as the Williams %R indicator shows the Overbought and Oversold conditions of the asset and helps the traders in seeing the entry and exit points in the market. The indicator was developed by Larry Williams in 1973.

So the Williams %R indicator helps the traders in making better decisions in their trading or in gaining some profits. The Williams %R indicator has a value of 0% to -100%, and the oscillator line of the Williams %R indicator moves between those values.

In the Williams %R indicator, there are two range values as one is from 0% to -20%, which shows the overbought condition of the market, while the other is between -80% to -100%, which shows the oversold condition of the market.

So the formula to calculate the value of Williams %R is as follows:

Williams %R = Highest High(usually 14 days) - Most recent closing price / Highest High(usually 14 days) - Lowest low (usually 14 days) × -100

• Highest High: The highest or maximum price within the specific period (usually 14 days).

• Lowest Low: The lowest or minimum price within the specific period (usually 14 days).

For example: there is an asset for which we have put 14 days, and there we observe that the Highest value which gets recorded was $100, while the Most recent closing price is $80, and the lowest value which was recorded was $70.

Williams %R = (100-80) / (100-70) × -100

Williams %R = (20)/( 30) × -100

Williams %R = 0.666 × -100

Williams %R = -66%

So the -66% is the approx value, which means that the market is in a normal position right now. As if the Williams %R is close to 0% that means that the buyers are in action at the moment and if the Williams %R is close to 100% that means that the sellers are in action at the moment.

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Now we will see that how to configure the Williams %R indicator and what are its best settings:

• So firstly we go to Tradingview.com and select any asset on which we want to use the Williams %R Indicator.

• Then we will click on the [Fx] indicators option.

• There we choose the Williams %R indicator.

• Then there is the setting we will choose the right Setting, according to our trade.

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So the default setting on Williams %R Indicator is 14 periods, it is the standard and most used setting, and it is also advised by the creator Larry William to use this setting. But we know that the best setting also depends upon the traders and their trading styles, as in short term trading we can use lower periods setting to get the signals a little early and in long term trading, we can use the high periods setting to get the more reliable signal.

In using the lower periods setting it gives the signals a little faster but it is not much reliable, but again it depends on the traders on how they are using it. Using Williams %R Indicator, with any other indicator especially with trends indicator can make it better.

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Question no. 2
_{How do you interpret overbought and oversold signals with The Williams %R when trading cryptocurrencies?}

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As we know that the Williams %R indicates the traders in finding the overbought and oversold signals. And as we know that when the Oscillator line of the Williams %R indicator fluctuates between 0% to -20% that means that the market is oversold condition and when the Oscillator line of the Williams %R indicator fluctuates between -80% to -100% that means that the market is in the Overbought condition.

In the Overbought condition, there will be buying pressure on the market, while in the oversold condition the selling of the asset has pressure on the market.

As you all can see in the above screenshot, that I have selected the STEEM/USDT asset on 4 hr time frame. And there we clearly can see that right now the oscillator line of the Williams %R indicator has been fluctuating between -80% to -100% that means right now the market is in the oversold condition right now because of that the prices of STEEM has also decreased.

We also can see that on 19 Sept the Williams %R indicator oscillator line was fluctuating between -80% to -100%, but on 22nd SeptWilliams %R indicator oscillator line was fluctuating between -0% to -20% that means that market was in overbought condition and as we also can see in the chart that the price of the STEEM was also going up that time.

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Question no. 3
_{What are "failure swings" and how do you define it using The Williams %R?}

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The Failure Swings actually happens when the Williams %R indicators oscillatory line does not able to reach the upper point which is -20% and also the lower limit which is -80. This failure swing is characterized as when the prices were going up but suddenly turn to a bearish trend or when the prices are going down but suddenly turns into a bullish trend.

Failure Swing actually happens because of weak trends which cause a trend reversal. The sideways movement also causes the trend reversal.

Failure Swing in Bullish Trend:

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As you all can see in the above screenshot that I have chosen the STEEM/BTC pair in 4 hr time frame and there we can clearly see the failure swing, as when the prices were going up but before the oscillatory line would have reach -20%, it made a trend reversal and the price of the asset start going in a bearish trend.

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Failure Swing in Bearish Trend:

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As you all can see in the above screenshot that I have chosen the SOL/USDT pair in 4 hr time frame and there we can clearly see the failure swing, as when the prices were going down but before the oscillatory line would have reach -80%, it made a trend reversal and the price of the asset start going in a bullish trend.

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Question no. 4
_{How to use bearish and bullish divergence with the Williams %R indicator? What are its main conclusions?}

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Divergence with the Williams %R indicator:

As we know that the divergence happens when the indicator and the prices chart or the movement of the prices goes in different directions. And we can find this divergence from the market early before it shows it in the chart, as in most cases trend indicators such as Williams %R indicator and RSI shows the divergence signal early before the movement in the chart.

Bearish Divergence with the Williams %R indicator

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In the bearish divergence with the Williams %R indicator, the Williams %R indicator oscillator line goes in the bearish direction, while the prices in the chart go in the bullish movement. And after that bullish movement of price the price turn towards a bearish trend.

As you also can see in the above chart, which I have taken of BTC/USDT on 4hr time frame. In that chart, we clearly can see the bearish divergence in the Williams %R indicator, while the price movement was going up, but after the divergence, the price movement in the chart takes the downtrend.

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Bullish Divergence with the Williams %R indicator

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In the bullish divergence with the Williams %R indicator, the Williams %R indicator oscillator line goes in the bullish direction, while the prices in the chart go in the bearish movement. And after that bearish movement of price the price turn towards a bullish trend and the high-risk takers in trading usually buy on this bearish trend, but the traders like me who usually don't want to take big risk wait for the price to go in the bullish trend again.

As you also can see in the above chart, which I have taken of BTC/USDT on 4hr time frame. In that chart, we clearly can see the Bullish divergence in the Williams %R, indicator, while the price movement was going downward, but after the divergence, the price movement in the chart takes the uptrend in the market.

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Question no. 5
_{How do you spot a trend using Williams %R? How are false signals filtered?}

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As we all know that we can spot the trend and trend reversals with the Williams %R. So to spot a trend we have to see that the Williams %R indicator oscillatory line should be moving. There we can spot the Bullish Trend, when the oscillatory line of the Williams %R is moving up or in uptrend or you can say it is above the -50% line, it is the strong trend, while the Bearish Trend happened when the oscillatory one of the Williams %R is moving towards downwards or is below the -50% line, so that's considered as the weak trend.

And to filtered the false Signals it is thought to be the best approach to use some more indicators with Williams %R, as it minimizes the risk and also filters the false signals from the trader's market or technical analysis.

So I will be using the Exponential Moving Average (EMA) indicator to filter the false signal given by the Williams %R.

_{I have set the setting at 144 period}

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Filtering the Flase Signal:

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In the above demonstration, we can see in the BTC/USDT 4 hr time frame, that market was in the Overbought condition as it was above the -20% oscillatory line of the Williams %R, but then in the Williams %R indicator it shows the pressure of the market, as the oscillatory goes below the -80% showing the oversold condition, but we came to know that it was a false signal because of EMA indicator, so because of EMA, we filtered out the false signal. As we can see that the price is moving above the EMA showing a bullish trend.

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Spotting the Correct Signal:

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In the above demonstration, I have taken the pair of BTC/ USDT in 4 hr time frame. And there we clearly can spot the correct signal, in which we can see that the Williams %R indicator shows the bearish signal, and we can see as the market was in the Bullish trend but when the Williams %R indicator shows the Bearish signal the market price also starts going in the bearish trend.

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Question no. 6
_{Use the chart of any pair (eg STEEM/USDT) to present the various signals from the Williams %R indicator.}

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LUNA/USDT:

Buy Trade Entry:

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When we see the market is in oversold condition or below -80% of the Williams %R indicator, we usually wait for the oscillatory line to move above a bit so we can make our buy trade.

So as you can see in the demonstration above I have taken the pair of LUNA/USDT, where I saw that the market was in an oversold position, but after some time the Williams %R indicator line starts going up so I wait up a bit to confirm the signal and also used the EMA indicator for that.

And I saw that the EMA line also moved below the prices that means that the price of the asset is about to go up. So I placed my buy trade there, and also put the Stop Loss and Take profit levels. And the ratio I take is 1:2(risk: reward).

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Sell Trade Entry:

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When we see the market is in overbought condition or above -20% of the Williams %R indicator, we usually wait for the oscillatory line to move below a bit so we can make our sell trade.

So as you can see in the demonstration above I have taken the pair of LUNA/USDT, where I saw that the market was in an overbought position, but after some time the Williams %R indicator line starts going down so I wait up a bit to confirm the signal and also used the EMA indicator for that.

And I saw that the EMA line also moved below the prices that means that the price of the asset is about to go down. So I placed my sell trade there, and also put the Stop Loss and Take profit levels. And the ratio I take is 1:2(risk: reward).

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_conclusion

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Williams %R indicator is a very good technical indicator that helps the traders in finding the correct signal. It shows the oversold and overbought signals of the market and also the price movement.

And because of Williams's %R indicator, we can get good bearish and bullish trends signals, and as well as the Trend divergence. To take the all out of Williams %R indicator it is also advisable to use it with more trend indicators like EMA. As it helps in filtering out the false signals.

Now finally, that was all from my side.

Regards,
@maazmoid123

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_{All the screenshots are taken from Tradingview, While I also have used Grammarly to minimize the Grammatical mistakes.}