facebook Fibonacci and the Trend Lines And Williams %R Combination - Online Commodity trading

The trend lines

Sometimes you do not need to use tools like the moving averages. If you have some experience in drawing the trend lines, it is also a good way to look for where to enter the position.

In the example below, the price is in a down trend. When a correction occurs, we can draw the trend line.
The price moved to the 38.2% level and down below the green trend line. It turned out that this was a false signal. In the next move, after hitting the 50% level, there was a break below there’d support line. This signal was correct and it was a good place to enter the position.

Break below support line as a signal to go short.

The Williams %R as confirmation

You can use oscillators as a source of a confirmation signal. If you have your favorite oscillator, test it and check what signals work as best confirmation.

My favorite one is the Williams %R. Most of the time, I use it for 33 back periods. For time frames lower than 1 hour, I use 55 periods.
It is a slightly different oscillator, because its range is between 0 (at the top) and -100 (at the bottom). When the line is between 0 and -20,then the price is overbought. When the line is between -100 and -80, the price is oversold; similarly to the stochastic oscillator, but the levels are different.

What I look for as regards the Williams %R are two things:

  1. A break of important support/resistance on an oscillator– I use it especially when the price action is not clear for me.

Many people do not know that you can draw support, resistance and trend lines on the oscillators also! I find it to be very useful. When the price action is too blurry for me, I look for some tips on an oscillator chart by drawing the trend lines there.

  1. A break in the overbought or oversold area.

In an uptrend, when there is a correction, I look at the oscillator and wait until its value is back at the -20 level and then I enter a long position.

Opening a trade with signal from Williams %R.

In another example, there is a strong trend down. There is a correction, but the price action is not that clear. What I look for is the %R back at the -80 line. When it happens, I enter my short trade.

Short position opened based on signal from Williams %R.

It is not a 100% correct signal and it is not the best tool to choose in all cases. In my trading, I find this to be quite good and effective. With good money management and using the Williams %R, your results should be better.

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