Tuesday, 2022-10-04, 2:42 AM
Forex-market
Welcome Guest | RSS
Site menu
Catalog categories
Brokers [2]
Software [14]
Forex for Beginners [86]
Trading Strategy [55]
Trading Systems [10]
Forex Psychology [15]
Forex Signals [11]
Currency trading [50]
Forecast [39]
Funny Forex [2]
Technical Analysis [84]
Other [5]
Forex Technical and Fundamental Forecasts for October 2009 [7]
Forex Technical and Fundamental Forecasts for November 2009 [2]
Scandi daily [20]
FOREX FORECAST 2010 [6]
Main » Articles » Trading Strategy

Williams %R - Balance of Power Strategy

This indicator was developed by Larry Williams and it is a version of the Stochastic Oscillator. Its values are plotted on an inverted scale from 0 to -100. Williams %R is efficient in trending markets.

There are two interpretations of the signals:

  • Values below -80 - -90 indicate an oversold market, while values above -10 - -20 show that the market is overbought (remember that the scale is inverted).

The other logic is opposite:

  • When the value of %R is higher than -10 - -20 the market is in a strong uptrend and respectively when %R is lower than -80 - -90 there is a strong downtrend.

A Moving Average is used to confirm the trend direction.

In this example strategy we will exit the market when the Balance of Power indicator crosses the zero line in the position's direction. The position closing price will be Bar Closing.

We will use the following opening rules:

Rules for a long position

  • Price is above the 50-period Moving Average (uptrend) and Williams %R goes above -10 (second signal for a strong uptrend0. The bar when this happens is marked as Signal bar.
  • Long position is initiated when the price breaks above the high of the Signal bar.
  • After opening a position we monitor Balance of Power indicator. When it crosses the zero line upward we close the position at the bar closing price.
  • Adding: if the price is still higher than MA(50) and %R is above -10 line, we add to a long position at the previous bar high.

Rules for a short position

  • Price is below the 50-period Moving Average (downtrend) and Williams %R goes below -90 line. The bar when this happens is marked as Signal bar.
  • Short position is initiated when the price breaks below the low of the Signal bar.
  • The exit is at the bar closing price, but only when BoP crosses the zero line downward.
  • Adding: when the entry conditions are satisfied we sell at the previous low.

Charts

Balance / Equity chart tested by Forex Strategy Builder

Balance / Equity chart

Indicator chart

Entry Indicator chart

Exit Indicator chart

Parameters, Statistics, Strategy Slots

See the full Strategy Overview generated by Forex Strategy Builder.

Category: Trading Strategy | Added by: forex-market (2009-10-15)
Views: 336
Total comments: 0
Only registered users can add comments.
[ Registration | Login ]
FOREX SEARCH
Custom Search
Login form
Search
Site friends
Statistics
Copyright MyCorp © 2022