WPR is the best scalping oscillator
Good afternoon, friends forex traders!
When you are looking for one of the key indicators for your trading system, you probably should turn to the experience of several generations of successful traders. The indicators that they use really work and really make a profit - this can easily be verified by their growing capital. Well, if such an indicator is by default included in most trading platforms, then this is also no accident. With indicator Wpr (Williams Percent Range) you probably met, or at least heard of him. It will be useful to get to know him better, perhaps he will be able to become your reliable assistant in trade.
Today we’ll talk about an indicator such as Williams' Percent Range, WPR,% R or Wm% R, developed by Larry Williams. Williams Percentage Range (% R) is a dynamic indicator that measures overbought / oversold conditions. As you know, stochastic lines were introduced by George Lane in the 50s of the last century. All calculations had to be done manually, and a group of traders developed formulas for oscillators, giving them the names:% A,% B,% C, etc. Only three were operational:% K,% D and% R. The first two curves are known as Lane stochastics, and the last is named after Larry Williams. This indicator was introduced in 1973.
Larry Williams, in the words of J. Lane, “honed and improved" the indicator% R invented by joint efforts. Williams even published a book with a promising title, "How I Won One Million Dollars While Working in Commodity Markets Last Year."
Currency pairs: Any
Timeframe: any from H1 and higher
Trading time: around the clock
Indicator Type: Oscillator
Recommended DC: Alpari, Exness, RoboForex
Description of the% R Larry Williams indicator
Historically, it was stochastics that became the most common indicator among traders (especially the forex market). This indicator is very often used to build trading systems, can be combined with moving averages, Bollinger bands and many other indicators that determine the direction of the trend. The% R indicator is much less known, despite the fact that software developers never forget it. The meaning of the indicator is this: it measures the ability of bulls and bears to close prices every day near the edge of the range over the past period. The Williams index confirms trends and warns of their upcoming changes.
The basic principles for interpreting oscillators discussed in previous articles are also applicable to the% R oscillator. The main signaling factor here is also the discrepancy in the areas of overbought and oversold, or the so-called divergence. To construct the% R indicator in an inverted scale, its values are usually assigned a negative sign (for example, -30%). Indicator values in the range from -80% to -100% indicate an oversold condition. Values ranging from -0% to -20% indicate that the market is overbought. The Williams Percent Range indicator has a feature - it can accurately predict price reversals.
% R Williams takes into account the position of the last closing price in relation to the range - the “highest-lowest price” in the recent period. It expresses the difference between the closing price that took place the selected number of days ago and the closing price of “today” as a percentage of the range for the recent period. If the WPR chart goes above the upper line, this indicates the strength of the bulls, but also the overbought market. If WPR falls below the bottom line, we can conclude that the bears are very strong and the market is oversold. The indicator reflects the balance of power of bulls and bears at the time of market close. It shows if the bulls can close the market near the upper range of the range in the recent period, or if the bears are strong enough to close prices near the bottom of the range.
Indicator Settings% R Larry Williams
In the MT4 terminal, the indicator is called William's Percent Range and allows you to set the averaging period, signal line levels (the default is -80 and -20), as well as the display style (color, line thickness, etc.). Larry Williams recommends using a 10-day period for calculations (by default, MT4 has 14). It has the borders of overbought and oversold zones at 90% and 10%, respectively (note, not 80 and 20, as in the terminal). The indicator can be used for various time periods: daily, during the day, or weekly. The direction of the weekly% R usually changes a week before this happens with the weekly MACD histogram. The% R bend indicates the need to more strictly review goals and stops, or close profitable trades. Finally, it should be noted that it is impossible to constantly be guided only by the intersections of the% R lines, since the indicator acts in completely different ways on the range and trend markets.
Williams recommends using a 10-day period for calculations. It has the borders of overbought and oversold zones at 90% and 10%, respectively. The rules for using the% R line practically do not differ from those already stated for stochastic lines.
The value of market cycles when choosing a calculation period
A special way to use% R is to use it in Theory of Cycles. It is recommended to take 5, 10 and 20-day periods corresponding to the calendar periods: 14, 20 and 56. But for a more accurate calculation, a time period equal to 1/2 the length of the cycle is used.
So, when calculating the Wilder RSI index, a period of 14 is used, which is half of 28. It is enough to mention that twenty-eight calendar days (or twenty exchange working days) represent the dominant monthly trading cycle, to which other time periods harmoniously obey . It is thanks to the 28-day trading cycle that we can explain the spread of the five-day stochastic analysis, ten-day pace indicator and fourteen-day RSI index, each of which, in fact, covers a period of time equal to 1/4 or 1/2 of this cycle.
Strictly speaking, its calculation is a modified formula for% K from the Stochastic Oscillator indicator:% R = - (MAX (HIGH (i - n)) - CLOSE (i)) / (MAX (HIGH (i - n)) - MIN (LOW (i - n))) * 100
CLOSE (i) - current closing price;
MAX (HIGH (i - n)) - the highest maximum for n previous periods;
MIN (LOW (i - n)) - the smallest minimum for n previous periods.
The value of the last closing price is subtracted from the maximum value recorded during a certain number of days. Then the difference is divided by the value of the price range for the same period. The indicator fluctuates from 0 to -100%. It is 0 when the price closes at the very top of the range.
Advantages and disadvantages
Often, overbought / oversold indicators for a long time remain in a state of overbought or oversold, while the price continues to rise or fall. Entering sales only because of the seemingly overbought, one can erroneously exit the market long before there are clear signs of its weakening. Especially often this happens with long-term, established trends - the indicator can go around the overbought and oversold zones for a very long time. In general, catching a trend reversal has always been considered a very difficult task, which is not suitable for a beginner to use.
Nevertheless, with a competent analysis, for example, when working on a trend on pullbacks, WPR shows pivot points well. Also, the indicator is very good at low volatility and work in the range markets.
As mentioned above, the WPR indicator really responds very quickly to short-term changes in the direction of the price of the instrument. For example, the signals of the WPR indicator on daily charts are usually at least a day ahead of the signals from the MACD indicator.
Signals from the% R indicator of Larry Williams
In general, the analysis of this indicator is exactly the same as for any other oscillators. Therefore, I will not dwell on the methods of its application. I will give only the basic ones.
The% R indicator, being an oscillator, gives signals of overbought / oversold market, crossing its signal lines. It would also often be useful to wait for the indicator to exit the zone, and then enter the deals. As I said above, with clear trends, the indicator gives a lot of false signals against the trend. However, like all oscillators. In general, when working on a trend on pullbacks in combination with WPR, the BollingerBands indicator is great. Other channel indicators, such as Envelopes and Keltner Channels, are also suitable.
Price Action patterns work well with the WPR indicator, such as doji, rails, absorption model, inner bar, pin bar and others.
As for the choice of timeframe, when working on PA, periods D1 and H1 are best suited. In addition, the WPR indicator shows itself perfectly when scalping and pipsing.
Today we met another great classic indicator. Of course, it is not without the drawbacks inherent in all oscillators. Nevertheless, WPR is very fast and sensitive, which makes it the most popular oscillator for scalping, along with the CCI indicator, and maybe even more popular. But never forget that no matter how perfect the indicator used, it is important to combine its readings with other signals and always under any circumstances adhere to your trading plan, and then success will invariably accompany you.