Crypto Academy Season 4 [ Advanced course ] week 4: Crypto Trading With Williams % R Indicator.

Hi guys, welcome to a new week at steemit crypto academy. Today I'll be making a post about the Williams %R indicator. This post is my homework submitted to the professor @kouba01.

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Explain the Williams %R indicator by introducing how it is calculated, how it works? And what is the best setting?

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A lot of these indicators work with the market on momentum. Some of the most popular ones include the MACD, Stochastics, and the RSI. among that Williams % R was one of a hidden gem. Today we are going to see about the mentioned hidden germ :)

As we guessed the tool was developed by a man named Larry Williams a promoter and publisher of trading materials developed it and it aims to tell whether a stock or goods market is trading near the high or near the low, in order to help the users to attain a good profit fro this tool.

The Williams %R indicator fluctuates between 0-100 and helps us in indicating the oversold and overbought conditions of the market. Anything in this indicator that is between 0% and -20% is considered overbought, while anything in this indicator that is between -80% and -100% is considered oversold.
When price enters the overbought zone, it indicates that the current price of an asset is approximating the higher high over a period of observation. Similarly, when the price of an asset enters the oversold zone, it indicates that the current price of an asset is approaching its lower low over a particular time frame.

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Calculation

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Highest high = Highest price of the selected time frame.
close = closing price
Lowest low = Lowest price of the selected time frame.

For example,
we take
Highest high = 30
close = 26
lower low = 22.

Williams %R = (30-26)/(30-22)*-100
= (4/8)*-100
= (0.5)*-100
= 50.

So Here you can see we found the result of 50 which lies in between 100 hence here we need to wait further for the market moment to get the Williams %R indicator to give clear confirmation whether the market is in the overbought or oversold region.

Here are the steps to add the Williams % R into your chart.

_{Image captured from TradeView}

Visit Tradingview.com open any chart and then click on the Fx option at the top of the chart.

_{Image captured from TradeView}

Type her as "Williams" and you'll see the Williams %R on the screen. Click on it.

_{Image captured from TradeView}

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The indicator would be added to the screen. You can alter the settings by following the steps below. Click on the settings of the indicator. The Williams %R indicator gives us good signals by crossing the overbought and oversold conditions in the market. I would prefer to go with the default settings of 14 periods, which would signify a period of 14 hours for a 1-hour chart and so on, as it would give me good market overbought and oversold conditions as well as good entry and exit points. Moreover, I got good divergence signals by using this setting as well. Selecting a shorter period, in my opinion, would allow the price to change even before reaching the overbought and oversold levels while setting a greater period would result in fewer passage chances due to longer signals.

How do you interpret overbought and oversold signals with The Williams %R when trading cryptocurrencies?

The value of the Williams R indicator oscillates from zero to minus hundred. When the value of Williams percent range indicator is between -80 to - 100, it indicates the oversold zone of an asset under consideration for that period of observation

_{Image captured from TradeView}

When the value of Williams's percent range indicator is between 0 to - 20, it indicates the overbought region of an asset under consideration for that period of observation.

What are "failure swings" and how do you define it using The Williams %R?

_{Image captured from TradeView}

Generally, Failure swings are a trend reversal line used to predict the market reversal and help the users to predict the market.

We can even benefit from this situation if we keep a close eye on it. When we see the indicator rising higher and nearing the danger line but failing to cross it, we know that a failure swing is likely to occur, hence indicating that we should sell the asset. Similarly, if we note that the indicator is heading down and nearing the danger line but failing to cross, this indicates that a bearish to bullish trend reversal is likely to occur, hence presenting us with an opportunity to buy the asset.

We can understand it in another way. In terms of price action, swing failure in a bullish market reflects the weakness of the bulls to push the price higher and the dominance of bears over bulls and their success to pull back the price.

How to use bearish and bullish divergence with the Williams %R indicator? What are its main conclusions?

Bullish Williams %R Divergence

_{Image captured from TradeView}

A Bullish Divergence is signified by the upward movement of the indicator while the price falls. This is a good buy signal. When the market is making higher high prices but when the indicator indicates the lower low price then we can meet and bullish Williams percentage R signal. This inverse pattern looks different in the chart so users can easily find out the bullish pattern.

In the above screenshot, you can see it is a real-time chart of ethereum cryptocurrency. In the chart we can clearly see the bullish signal of our indicator hence we are facing the result of the bullish market today with an increase of 8 percentage.

Bearish Williams %R Divergence

_{Image captured from TradeView}

A Bearish Divergence is signified by the downward movement of the indicator while the price rise. This is a sell-buy signal. The bearish divergence signal looks like above but it is not exactly when the signal forms like the above chart we can see the downward moment but the above chart was just for user visual. When the divergence like the above chart happens next move of the market will be a bearish bleed.

How do you spot a trend using Williams %R? How are false signals filtered?

_{Image captured from TradeView}

We can spot the trend using Williams percentage or indicator without a false signal by using multiple indicators in combination with it. Here in the above screenshot, you can see the solid confirmation that the market is going to change for a bullish trend. We can get the confirmation from our signal here. In addition, to eliminate the false signal we have to use additional indicators like relative strength index or moving average for the indicator which you use and you believe it works fine.

Next with the help of support and resistance of the market, we can also get some extra confirmation of the market and when the indicators touch the level of the overbought oversold region will help you to give extra confirmation of your prediction.

There are some other external factors that may change the market Trend we can use to make a profit for example a month before Elon Musk announced did that Tesla motors will accept Bitcoin as a payment hence the value of Bitcoin has increased drastically. In these cases, we can get huge failure of technical indicators.

Use the chart of any pair to present the various signals from the Williams %R indicator.

_{Image captured from TradeView}

From this chart, I am going to explain why I choose this point as an entry and the second point as an exit point in a detailed manner.

You can see that in our William percentage or indicator as I discussed above we should need to buy at -100 to -80 region where we can see that it is an oversold region hence we can see a good price action when we enter at this market point.
In the next few days of entry, our investment will grow gradually and reaches a certain exit point where we get a good profit in the above screenshot you can see that how much it has been increased and it was nearly 50 percent of the market bump.

In order to secure my investment, we can choose the lower Lo as your stop loss which helps you to exit from the market in case of external factors like cryptocurrency-related news for example China banned cryptocurrency mining and complete ban of cryptocurrency in China news like this will drastically reduce the price of entire Crypto market.

Conclusion

The Willams %R indicator measures the strength of a current trend in the market and defines between 0 and -100 where 0 indicates overbought and -100 indicates the oversold levels.

I would like to thank @kouba01 for the wonderful lesson. I learned a lot from this lesson and from this homework. Kindly review my homework and share your thought on my work professor :)

Thank you