| jerry_friendly |
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| Friday, July 29, 2011 |
| Wednesday, August 31, 2011 9:17:59 PM |
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Hey folks just wanted to share a way to use a leading indicator like Williams % without false signals. It's very simply, markets works on supply & demand therefore we need a easy way to test a indicator before we enter a trade. For position trading, When the Williams % reaches over sold, draw a line of support on the price chart at that level. As price moves up & reaches over bought in the Williams %, draw a resistance line on the price chart at that level. Now we have our support & resistance lines in place to monitor a entry for a position. If the stock is bullish, price will find support on the resistance line on low volume (no selling pressure on a down bar). If this happens, we can expect higher prices as long as we are able to determine there was previous buying to the left of the chart at lower price levels. This is called absorption (buying into selling). If on the other hand the williams % does not find support on resistance then it falls toward over sold witch we would call the previous over sold a false signal. By using lines to reference important areas in the price chart from the Williams %, we stay on the right side of the market. We all know price may be over sold & keep falling however if price find supports where it no longer falls then we are happy. We also know if price is over sold & refuses to fall below our reference line, this must be a indication of happy days.For swing trading, we do not have time to test a indicator, we must think fast. All we need to do is place a reference line on the chart as we enter over sold on the Williams % then as price find supports on that line, we can expect higher prices. The line must be placed as we enter over sold & not exit over sold. If price rises up to this area & holds then we have improved our risk factor on taking a swing.The idea here is to use a indicator in a way that reduces false signals by buying when price pushes up above resistance & holds if position trading otherwise we end up with a false signal. This also means we should see some activity on volume as the market tries to push up above that supply.Good luck trading
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