Good day traders,
In this article I am going to show you and explain you William % R indicator. This indicator created by Larry Williams and you can use it to identify overbought and oversold areas. As you already know and as I told you many times in many previous articles in an oversold area the price is lower than his real value this period and it’s possible to reach in higher levels as the sellers have exhausted. On the other hand when we are in an overbought area this means that the price of the underlying asset is in higher levels from its real value and it’s possible a fall of the price as the buyers are exhausted. So, as you understand you can take long positions when we are in an oversold area and you can take short positions when we are in an overbought area. Let’s go to the first chart of the day.
This chart is from EURUSD currency pair and I use a 5 minutes timeframe and I have the Williams %R indicator. The defaults period is 14 days and the default levels are -20 for overbought areas in which you can take shorts positions, in the upper line of the indicator, and the -80 level in which you can take long positions in the lower line of the indicator. I drew two circles in this chart. The first of them is level -80, in a oversold area and you can see that we have a small rise in the market. In the second circle we are in an overbought area in -20 level and as you can see we have a fall of the market.