TOP 3 INDICATOR BOOT CAMP: PERCENT R - Bigtrends · TOP 3 INDICATOR BOOT CAMP: PERCENT R Explore ... A Trend Confirmation ... This is the Initial Breakout point

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TOP 3 INDICATOR

BOOT CAMP:

PERCENT R

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that may impact your tax situation.


What is Percent Range (%R)

Percent Range

An Oscillator, similar to Effieicncy

Ratio and CCI in concept

Finds overbought/oversold areas

Is built upon the Philosophy:

The strongest trends are when a

stock is at or near recent highs

The weakest trends are when a

stock is at or near recent lows

The BigTrends use of the indicator is

significantly different than the initial

use when it was created.

Critical Technical Analysis Tool


Williams Percent R

Key Points

Percent R shows big moving stocks,

right as they launch.

Unconventional uses of indicators

can yield lucrative results.

Less noise can lead to better trading.

“Low Risk” entry points are critical to

managing your trades.

Percent R can work on all

timeframes and for all traders.

The BigTrends Approach


Percent R

Larry Williams BigTrends

Created the Williams Percent R

indicator. Used 14-Bar setting.

Scale was 0 to -100.

Oversold Level: - 80.

Overbought Level: -20.

Extreme levels of -80 & -20 used to

signal reversal points.

Stocks can’t stay oversold or

overbought for an extended period of

time.

Adapted Percent R to improve

efficiency. Use 30-Bar setting.

New Scale: 0 to +100.

New Oversold Level: 20.

New Overbought Level: 80.

New Extreme levels of 80 & 20 are

used to signal a trending security.

Mid-Line 50 Level is also useful

Stocks often remain oversold or

overbought for long periods of time.

Conventional vs. BigTrends


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Williams %R

%R is similar to Stochastics in measuring overbought & oversold levels

The traditional scale is from 0 down to –100 (I prefer from +100 down to 0)

While most use a 10 or 14 bar setting, I use a 30-bar setting

It is smoother but still responsive

MY GOAL:

To find the Strongest Trends (Up or Down)

Avoid the noise within a trading range

Focus on top (or bottom) 20 percentiles

Avoid the middle 60 percentiles (20 to 80)

Refresher


Percent Range

Conventional vs. BigTrends


Finding Confirmation

Traders need to focus on consistent results

Avoid whipsaws and stop-outs whenever possible

The best method filters out many of your bad trades

Use a Two-Step Approach:

A Technical Set-Up

A Trend Confirmation

A Set-Up is an indication that a trend could be developing

Avoid the temptation to rush into a new trade

The best trends display similar characteristics

Using specific criteria of the biggest and best trends, you can receive confirmation that a trend is truly developed and in force

When does a trend really start?


Percent R

BULL CONFIRMATION:

Look for “overbought” reading above 80

Followed by a close above that bar’s high, within the next 5 bars after Setup

This is the Initial Breakout point.

The bar when we get the initial overbought reading is what I call the Setup Bar.

Bull Confirmation


Percent Range

Breakout


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Percent R

BULL RETEST: Once trend is Bull Confirmed

Look for a move below the “overbought” reading under 80

(at 79.50 or less)

Use this bar’s Low as the new Closing Stop

This is the best Low-Risk Entry Point to open a Position for a bull trade:

If you missed the breakout, or

If you want to add to your existing profitable position

Bull Retest


Percent Range

Retest


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Percent R

BEAR CONFIRMATION:

Look for “oversold” reading below 20

Followed by a close below that bar’s low, within the next 5 bars after Setup

This is the Initial Breakdown point.

The bar when we get the initial oversold reading is what I call the Setup Bar.

Bear Confirmation


Percent Range

Breakout


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Percent R

BEAR RETEST: Once trend is Bear Confirmed

Look for a move above the “oversold” reading over 20

(at 20.50 or higher)

Use this bar’s High as the new Closing Stop

This is the best Low-Risk Entry Point to open a Position for a bear trade:

If you missed the breakout, or

If you want to add to your existing profitable position

Bear Retest


Percent Range

Retest


Three New Methods for Percent Range

It is possible to have a

retest intra-bar, but by the

close it is gone.

The disappearance of the

retest is the “phantom”.

Instead of waiting for the

bar to close, you can

enter the trade during the

phantom retest.

This is more aggressive

than regular retests.

Phantom Retest

More successful as a

market timing indicator

rather than a trading

indicator.

Uses the 50 level as a

mid-point for transition

A cross of that mid-point

suggests a change in the

underlying trend

Requires both a set-up

and confirmation

50 Level Cross

Once a retest is in place,

you have a critical low

(bull) or high (bear) that is

your closing stop.

Many stocks will violate

your closing stop intra-

bar, but not at the close.

This is why we place so

much emphasis on the

close of a bar for our exits

with Percent Range

Bend But Don’t Break

Understand the Differences

Methods vary in trend trading theory


Phantom Retests

Phantom Retests

Once you have mastered the Percent

Range breakout and retest methods,

you will see other chart patterns.

One of the more common is on

confirmed breakout trends.

If you miss the initial breakout, you

are likely looking for a retest.

Retests can happen intra-bar, but a

late change in the stock can make

the retest non-existant by the close.

Phantom retests are for more active

traders seeking increased activity.



Percent Range

Phantom Retests


Percent Range

Phantom Retests


Percent Range

Phantom Retests


Bend But Don’t Break (BBDB)

BBDB




One of the more common takes

place right after a retest.

Often, it appears that the key level

from the retest is going to violate

while the bar is still open.

If you stay patient, understanding this

chart pattern can help to limit early

exits and costly whipsaws.



Percent Range

BBDB


Percent Range

BBDB


Percent Range

BBDB


Percent Range

Retest


50 Level Cross

50 Level Crosses




When timing a broad index or

commodity on daily, weekly or

monthly charts, this is the method.

Think of the 50 level on Percent R as

the “Line in the Sand”.

A set-up and confirmation above 50

is bullish; A set-up and confirmation

below 50 is bearish.



Percent Range

50 Level Cross


Percent Range

50 Level Cross


Percent Range

50 Level Cross


Percent Range

50 Level Cross


Staying With Winning Trades

Trading Strategy

Give yourself a chance to stay with a

Big Trend by taking HALF of your

position profits at 100% or more

This allows you to release the fear of

giving up profits, as you recoup your

initial investment and guarantee at

least a breakeven

Ride the other half position until it

gives back half its gains, or exit half

again if it later doubles once more

Trade Management


The Closing Stop

Stops

To prevent being stopped out by

intraday noise, Use the concept of a

stop only at the end of a given bar.

This “Closing Stop” concept can

prevent numerous whipsaws

Note: It requires a more effort to

implement correctly.

For a daily closing stop, use the price

15 minutes before the end of the day.

If the stop is violated, place a Market

Order to exit the position.

Critical Options Principle


Exploring Stock Substitutes

Trading Strategy

As you learn the ins and outs of the

Indicators, you need to master

proper options selection

We will use Percent R as our

indicator to identify strong trends

Once a trend is confirmed, you need

to choose the correct option to buy

You should be able to quickly

determine what option to buy

Focus on Execution


Stock Trade Option Trade

Buy 100 ABC shares @ $37.48

Cost = $3,748

Stock goes to $48.83

Long Shares gain $1135, or

30.2% ROI

Buy 1 ABC 35 CALL @ 5.50

Delta of 0.69

Cost = $550


ITMs reach $14.50

gain $900, or 163.6% ROI

Stocks Substitute

Bull Trades


Stock Trade Option Trade

Short 100 XYZ shares @ $57.38

Cost = $5,738


Short Shares gain $956, or

16.6% ROI

Buy 1 XYZ 60 PUT @ 8.60

Delta of 0.76

Cost = $860


ITMs reach $18.90

gain $1030, or 119.7% ROI

Stock Substitute

Bear Trades


SPY & DIA (Last 5 Years)


Important Final Points

Percent R

On %R Breakouts consider adding a part of

your position & saving some for %R Retests

Consider %R Retests as lower-risk entry area

In The Money (ITM) options are more

expensive, but they have Intrinsic Value

allows you to stay with a Percent R signal

better than more aggressive options

Option Charts can also tell you a lot about the

power of the %R Trend

Triple Confirmation adds extra confidence

with multiple time frames in same direction

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TOP 3 INDICATOR BOOT CAMP: PERCENT R - Bigtrends · TOP 3 INDICATOR BOOT CAMP: PERCENT R Explore ... A Trend Confirmation ... This is the Initial Breakout point