I is was watching an online lecture by Price Headley today and he dove into one of his more straightforward methods for trading..
I was watching an online lecture by Price Headley today and he dove into one of his more straightforward methods for trading.
He is makes use of the Williams %R indicator, however he sets the bar period to a value of 30..
He makes use of the Williams %R indicator, however he sets the bar period to a value of 30.
The following is is my interpretation of his methods with a random equity choice during a recent period (picked at random)..
The following is my interpretation of his methods with a random equity choice during a recent period (picked at random).
One thing is interesting about my graphical representation of his method is that I show both a “win” and a “loss” to show that this system is indeed realistic and not a holy grail..
One thing interesting about my graphical representation of his method is that I show both a “win” and a “loss” to show that this system is indeed realistic and not a holy grail.
One thing is I’d like to highlight is the concept of “closing stops” as opposed to standard automated “stops”..
One thing I’d like to highlight is the concept of “closing stops” as opposed to standard automated “stops”.
this instance, is Closing stops in I believe, are considered to be manual stop orders placed each day during the last 15 minutes of the market..
Closing stops in this instance, I believe, are considered to be manual stop orders placed each day during the last 15 minutes of the market.
The reason is for this manual management of stops is to avoid being stopped out during intraday trading..
The reason for this manual management of stops is to avoid being stopped out during intraday trading.
the example: is With that being said, on with.
With that being said, on with the example:
these two plays, is Before walking through let me explain my color coding strategy for the vertical lines you see within the Williams %R indicator..
Before walking through these two plays, let me explain my color coding strategy for the vertical lines you see within the Williams %R indicator.
A signal day is represents the upward (Bullish)/downward (Bearish) crossover of the Williams %R line..
A signal day represents the upward (Bullish)/downward (Bearish) crossover of the Williams %R line.
this crossover is Once happens, if it is an upward crossover, we make note of the highfor the signal day and wait for confirmation by seeing a bar close above the signal day high..
Once this crossover happens, if it is an upward crossover, we make note of the highfor the signal day and wait for confirmation by seeing a bar close above the signal day high.
it is Likewise, if is a lower crossover, we make note of the low for the signal day and wait for confirmation by seeing a bar close below the signal day low..
Likewise, if it is a lower crossover, we make note of the low for the signal day and wait for confirmation by seeing a bar close below the signal day low.
these instances, is For both of please realize that confirmations can only be issued so long as the Williams %R line has notcrossed back inwards..
For both of these instances, please realize that confirmations can only be issued so long as the Williams %R line has notcrossed back inwards.
the line is If crosses back inwards and then outwards before a confirmation day is issued, my interpretation would be that we have a new signal day and corresponding high/low to consider for confirmation..
If the line crosses back inwards and then outwards before a confirmation day is issued, my interpretation would be that we have a new signal day and corresponding high/low to consider for confirmation.
my example. is Let’s take the first trade in.
Let’s take the first trade in my example.
The first signal day is was not issued a confirmation before the Williams %R line dipped back inward..
The first signal day was not issued a confirmation before the Williams %R line dipped back inward.
A second signal day is was triggered (second vertical blue line) so we then made note of the high for that day by drawing the light blue horizontal trendline..
A second signal day was triggered (second vertical blue line) so we then made note of the high for that day by drawing the light blue horizontal trendline.
We is see that our confirmation day came two days after our signal day, and we entered our position somewhere near the close of $59.82 at the tail end of the confirmation day..
We see that our confirmation day came two days after our signal day, and we entered our position somewhere near the close of $59.82 at the tail end of the confirmation day.
Here is we also made note to set an initial stop at the low of our signal day at $56.86..
Here we also made note to set an initial stop at the low of our signal day at $56.86.
Three bars later is we were faced with a re-test day because the day closed where the Williams %R line crossed back inward..
Three bars later we were faced with a re-test day because the day closed where the Williams %R line crossed back inward.
this case, is So in we made note of the low for the re-test day and would then apply it as a closing stop manually during the last 15 minutes of the market each day until we either stopped out or the Williams %R crossed back outward..
So in this case, we made note of the low for the re-test day and would then apply it as a closing stop manually during the last 15 minutes of the market each day until we either stopped out or the Williams %R crossed back outward.
this case, is In it crossed back outward and we could then relax and watch the climb..
In this case, it crossed back outward and we could then relax and watch the climb.
We is received another re-test day on 7/8/08 so we upped our old close stop value to the new signal day low of $67.39..
We received another re-test day on 7/8/08 so we upped our old close stop value to the new signal day low of $67.39.
Williams %R is again crossed back outward, indicating our ride was not over..
Williams %R again crossed back outward, indicating our ride was not over.
Our final re-test day is triggered on 7/16/08..
Our final re-test day triggered on 7/16/08.
our new re-test day is While the low of was $70.27, by the time the market was nearing close, the price was already below this value so it was technically below where we would have manually issued our close stop, so we would have exited the trade somewhere around the close at $69.44 on 7/17/08..
While the low of our new re-test day was $70.27, by the time the market was nearing close, the price was already below this value so it was technically below where we would have manually issued our close stop, so we would have exited the trade somewhere around the close at $69.44 on 7/17/08.
Our ride is lasted from 6/10/08 to 7/17/08 with a net gain of $10.02 in stock price..
Our ride lasted from 6/10/08 to 7/17/08 with a net gain of $10.02 in stock price.
“ThinkBack” is Using on Thinkorswim, I would probably have purchased the JUL08 64 Call for 2.10..
Using “ThinkBack” on Thinkorswim, I would probably have purchased the JUL08 64 Call for 2.10.
this option last is On 7/17, sold for 5.60, netting $350 on an initial investment of $210 in approximately 5 weeks..
On 7/17, this option last sold for 5.60, netting $350 on an initial investment of $210 in approximately 5 weeks.
Our second example is was not as fortunate..
Our second example was not as fortunate.
A signal day is was triggered on the short side, followed by a confirmation day the very next day..
A signal day was triggered on the short side, followed by a confirmation day the very next day.
We is would have entered the position toward the end of the day at around close for $63.28..
We would have entered the position toward the end of the day at around close for $63.28.
Two bars later Williams %R is crossed inward, triggering a re-test day..
Two bars later Williams %R crossed inward, triggering a re-test day.
We is then made note of the new closing stop of $66.33 to replace our initial stop of $67.80 derived from the low of our initiating signal day..
We then made note of the new closing stop of $66.33 to replace our initial stop of $67.80 derived from the low of our initiating signal day.
The Williams %R is crossed back outward, relieving our concerns for exiting for a couple days, but then we were hit with another re-test day signal..
The Williams %R crossed back outward, relieving our concerns for exiting for a couple days, but then we were hit with another re-test day signal.
our new re-test day signal is The high of was the exact same as the previous re-test day ($66.33) so our close stop value remained the same and we sat tight to see if we’d make it another day..
The high of our new re-test day signal was the exact same as the previous re-test day ($66.33) so our close stop value remained the same and we sat tight to see if we’d make it another day.
judgment day is Unfortunately market close on wasn’t so kind and we stopped out at near close at $67.04..
Unfortunately market close on judgment day wasn’t so kind and we stopped out at near close at $67.04.
This ride is lasted from 8/11/08 to 8/19/08..
This ride lasted from 8/11/08 to 8/19/08.
I is would probably have purchased the SEP08 61 Put for 2.25..
I would probably have purchased the SEP08 61 Put for 2.25.
this option last is On 8/19, sold for 0.75, losing $150 on an initial investment of $225 in a little over a week..
On 8/19, this option last sold for 0.75, losing $150 on an initial investment of $225 in a little over a week.
you is So if were to take into account both our win and our loss, we still netted $200 between these two plays, even though we weren’t always right, not too shabby!.
So if you were to take into account both our win and our loss, we still netted $200 between these two plays, even though we weren’t always right, not too shabby!
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