HomeWorkPost-- SteemitCryptoAcademy -Crypto Trading With Williams % R Indicator [@kouba01]

The lecture was really amazing Professor @kouba01 and I learn so much. I will surely use these things in my trading to get even better accuracy. Here is my homework.

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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 is an Oscillator created by Larry Williams and it is plotted below the price of the asset. It gives an idea about the recent closing price over a specified period of time. It uses Highest High, Lowest Low & Most Recent Closing to calculate its value and it ranges from 0 to -100. Williams %R is a bounded indicator and also short by WPR which is William Percentage Range.

It has mainly 3 situations-

• If the value is between 0 to -20 then it is called as Overbought Zone
• If the value is between -20 to -80 then it is called as Normal Zone
• If the value is between -80 to -100 then it is called as Oversold Zone.

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Calculations:

image source
To find the % of this ratio we need to multiply it by -100%.

There is an asset which data is given below based on the last 14 candles-
Highest High= 175, Lowest Low= 125 and Most recent close= 142. Let's implement this data in the formula to calculate the value of WPR.

Let,
x= (Highest High- Most recent close)= 175-142= 33
y= (Highest High- Lowest Low)= 175-125=50

WPR =( x/y)(-100)
WPR= (33/50)(-100)
WPR= 0.66*-100
WPR= -66

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Configure Williams %R on the chart

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Most of the time I use Coinigy which has Tradingview.com API and I like it because of its colorful graphics.

• Click here- https://www.coinigy.com/main/markets/BITS/USDT/BTC

• Click on Indicator and in the Search Box type Williams and click on "Williams %R"

• You can modify the setting as per your need. I would like to go with 20 periods.
  

I have observed that the 20-period average works really well and gives fewer signals as compared to the other periods and is more accurate because it is taking the calculation of the last 20 candles. You can notice that 20 periods are giving only 7 Overbought zones where 14 periods are giving 9 overbought zones and the accuracy looks better. IN this 20 period we calculate the value based upon the last 20 candles and BTC follows 20, 50, 200 MA really good.

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

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Whenever the value of WPR is crossing -20 is considered as an Overbought zone and when it is crossing -80 then it is considered as an oversold zone. When the price is in the Overbought zone then we can look for the Reversal opportunity and when it is in the Oversold zone then we can look for Reversal or buy opportunity.

• If the value is between 0 to -20 then it is called as Overbought Zone
• If the value is between -20 to -80 then it is called as Normal Zone
• If the value is between -80 to -100 then it is called as Oversold Zone.

If the value is 0 then it can be called an extreme Overbought zone that means Bulls are at the peak and when it is -100 then it can b called an extreme Oversold zone that means Bers is at the peak.

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3. What are "failure swings" and how do you define them using The Williams %R? (screenshot required)

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Failure Swings happens whenever the strength of the momentum is slow and suppose there is a train A which is going from Station X to Stations Y but due to lack of Diesel, it stopped in between and comes back somehow. Here the Train is our WPR once it departs from the Oversold zone then the next Stop is the Overbought zone however due to lack of momentum it reversed back. This happens in the case of the Overbought zone to the oversold zone. In the chart I have marked some Swing Failures with Rectangle.

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4. How to use bearish and bullish divergence with the Williams %R indicator? What are its main conclusions? (screenshot required)

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The meaning of Diversion is Discrepancy which means something or chaos. It usually being formed whenever the price is losing momentum. Diversion can be seen in many indicators like Williams %R, RSI, Volume indicator, MACD, etc. In our trading Diversions are very helpful to find the reversal. Diversions are two types-

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Bullish Diversion: Bullish diversion is formed when the sellers started losing momentum/strength to take the price even more down. In this scenario, the price makes Lower Lows however the Indicator makes Higher high.

In the above scenario, you can see the price is making lower lows however WPR is making higher highs and after sometimes the price is reversed.

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Bearish Diversion: Bearish Diversion is formed when the buyers started losing momentum/strength to take price even more up. In this scenario, the price makes Higher High however the indicator makes Lower Lows. In the chart, you can see BTC made a high of 48000 then made another high of 48800 however you can see WPR is making lower lows and as a result, the price reversed.

Conclusion:
The diversions from WPR look the same as RSI and once we will get confirmation from other indicators then we can easily ump into the trade. The success of WPR diversions is really good and easily gives 1:1 target.

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5. How do you spot a trend using Williams %R? How are false signals filtered? (screenshot required)

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it is very easy to identify the trend using the Williams %R indicator, whenever we see the value of WPR is going with the respect to the price we can say it is trending and it could be Downtrend or Uptrend.

In this chart, you can see the price is making higher high and along with that WPR is also increase then it can be considered as Uptrend.

In this example, you can see the price is making Lower down and along with that WPR is also sloping down. This is a downtrend.

How are false signals filtered?

Alone WPR is not enough to give us proper confirmation trades so what we can do is to use it with other indicators to get double confirmation. This will help us to avoid so many false trades. I will use MACD to get additional confirmation, whenever the price is going down along with the WPR you may notice at the same time MACD is also giving confirmation so here we can are getting 3 confirmations- Price Action, WPR, MACD Crossover.

The same thing happening at the time of Trend line breakout we are getting 3 confirmations here- Price action trendline breakout, WPR trendline breakout & increase value, MACD crossover.

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6. Use the chart of any pair (eg STEEM/USDT) to present the various signals from the Williams %R indicator. (Screen capture required)

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Here are the signals generated by Williams's %R indicator also we can get additional confirmation using other indicators too however I am going to use only WPR to get the signals.

BCH/USDT, 4 hr timeframe

In every trade, you can see I have planned for selling when it is coming back from the OverBought zone and keeping SL above the previous high. In the case of Sell Signals, we can take entry when it is coming back from the Oversold zone and keep slow below the previous low or 1:1.

ADA/USDT, 1H timeframe

In these trades, you can see I am planning the trade purely based on WPR. When it is coming back from the Overbought zone, we can go short here and whenever it is coming back from the Oversold zone we can open Long. It is always a wise decision to check the price action too while taking the trades.

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Conclusion

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WPR is a great tool that helps us to identify Diversions, Strength, Trend and gives many buy/sell signals to trade. However, I believe this alone is not sufficient and if we can mix it with other indicators then it will be very useful. I would like to replace WPS with traditional RSI to get better confirmation. Unlike other indicators, it also generates false signals sometimes and this is not something that is weird because the accuracy of most of the indicators is 60-70% and it comes under that category.