suggested by Ken G.
When buying and selling stock the principle rule is to Buy Low, Sell High.
>Brilliant! Is that idea yours?
The questions become:
There are a jillion suggested answers to these questions, like Bollinger bands, moving averages, MACD, stochastics, Fibonacci, etc.
- Low compared to what?
- High compared to what?
One that I never heard of is Williams %R (named after Larry Williams).
I was, however, surprised to find that it's just the stochastic oscillator ... but upside down?
Williams %R says:
- Low compared to the lowest price over the past N days.
- High compared to the highest price over the past N days.
Williams measures the current price on a scale running down from the highest to the lowest price.
%R = 100(High - Price) / (High - Low)
The answers to the above questions?
- When %R is close to 100%, the price is close to the Low over the past N days.
- When %R is close to 0%, the price is close to the High over the past N days.
- Buy when %R is close to 100%
- Sell when %R is close to 0%
Notice that Buy and Sell signals are the same. Only the name has been changed.
>And that stochastic thing?
That puts the current price on a scale running up from the lowest to the highest price (over the past N days).
%K = 100(Price - Low) / (High - Low)
>Buy and Sell signals?
Yes. When %R is less than, say 20%, then Buy and ...
>When it's above, say 80%, then Sell. Right?
You got it.
Here's an example (using daily General Motors prices over the past few months)
20% and 80% levels.
A plot of %R and the stock Price.
Whenever %R drops below 20% there's a
When it rises above 80% ...
NO. It's Buy.
Willimas %R for Microsoft
To download a .ZIPd spreadsheet which does this sort of thing, RIGHT-click
here and Save target file
... but don't expect miracles