William R Forex Trading Strategy

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William R Forex Trading Strategy 1

Most traders look for trading strategies which allow for a very high win ratio with high yielding trades. This is why many traders are lured towards strategies advertised as 90%-win rate trading strategy or 6:1 reward-risk ratio strategy. Yes, that all sounds great and yes that is possible to some extent, but that is very difficult to achieve. What new traders should be aiming for is a strategy which is a good mix of both. A strategy that allows for a decent win rate and a decent reward-risk ratio. Heck, you could even be a profitable trader with a trading strategy that has a little above 50%-win rate and a little above 1:1 reward-risk ratio.

The William R Forex Trading Strategy is one of those strategies that have a decent win rate and reward-risk ratio. At the same time, it also allows traders to catch some of those high yielding trades from time to time. By doing this type of strategy, traders could steadily grow their accounts in the long run.

William’s %R Indicator

The William’s %R indicator was developed by Larry Williams. It is a very responsive oscillating indicator which is the inverse of the fast line of the stochastic oscillator. While the Stochastic Oscillator’s fast line compares the close to the lowest low, the William’s %R indicator computes for the close relative to the highest high. It then compensates for the inversion by multiplying the value with -100. This then causes the William’s %R to be plotted inversely, with -100 as the lowest and zero as the highest. The oversold territory is below -80 while the overbought territory is above -20. Unsurprisingly, the fast line of the Stochastic Oscillator is also reflective of what the William’s %R is doing, with minute differences.

The William’s %R could be used in a variety of ways. Mean Reversal traders would be taking the signals produced whenever the William’s %R line falls back within -80 to -20 while coming from oversold or overbought territories.

Momentum traders on the other hand would take the exact opposite of the trade signal. They would instead take the direction of the overextension as it starts, expecting for the momentum move to cause a trend. They would instead take a buy trade when the line crosses above -20 and sell if it goes below -80.

Lastly, crossover reversal traders would take signals based on the midline which is at -50. Crosses going over -50 are interpreted as a bullish trend direction reversal, while crosses going below it are interpreted as bearish trend reversals.

EMA Crossover Signal

Moving Average Crossover strategies are probably one of the most basic types of trend reversal or trend following strategies. It is based on the crossing of a faster moving average over a slower moving average. Trend direction is then based on the direction of the crossover. The assumption of this type of strategy is that, since the moving averages are a basis of a trend, whenever the short-term trend crosses over a longer-term trend, the trend direction is assumed to have shifted.

The EMA Crossover Signal indicator is a custom indicator which provides entry signals whenever it detects crossovers of an Exponential Moving Average. Traders could change the parameters of the short-term and long-term moving average in order to suite their trading strategy.

Trading Strategy

The William R Forex Trading Strategy is a basic crossover trading strategy based on the confluence of the William %R indicator and the EMA Crossover Signal.

The William %R indicator will be used as a basic crossover oscillating indicator. Trades will be taken based on the crossing over of its midline, which is at -50.

The EMA Crossover Signal indicator will be used as an entry signal based on the 25-period and 30-period EMA.

Trades will be taken whenever there is a confluence between the crossing over of the William %R over its midline and the appearance of the entry signals based on the EMA Crossover Signal. These entry signals should be somewhat aligned in order for the trade to be considered.

Indicators:

  • EMA Crossover Signal
    • Faster EMA: 25
    • Slower EMA: 30
  • William’s Percentage Range
    • Period: 56

Timeframe: 1-hour, 4-hour and daily charts

Currency Pairs: major and minor pairs

Trading Session: Tokyo, London and New York sessions

Buy Trade Setup

Entry

  • The %R line should cross above -50 indicating a bullish trend reversal
  • The EMA Crossover Signal indicator should print an arrow pointing up indicating a bullish crossover
  • These entry signals should be somewhat aligned
  • Take a buy order at the confluence of these conditions

Stop Loss

  • Set the stop loss at the support level below the entry candle

Exit

  • Close the trade as soon as the EMA Crossover Signal indicator prints an arrow pointing down

William R Forex Trading Strategy 1

William R Forex Trading Strategy 2

Sell Trade Setup

Entry

  • The %R line should cross below -50 indicating a bearish trend reversal
  • The EMA Crossover Signal indicator should print an arrow pointing down indicating a bearish crossover
  • These entry signals should be somewhat aligned
  • Take a sell order at the confluence of these conditions

Stop Loss

  • Set the stop loss at the resistance level above the entry candle

Exit

  • Close the trade as soon as the EMA Crossover Signal indicator prints an arrow pointing up

William R Forex Trading Strategy 3

William R Forex Trading Strategy 4

Conclusion

This trading strategy is a basic crossover strategy which allows traders to steadily increase their trading account balance. It does this by giving trade signals that have a decent probability of being profitable while at the same time giving a decent reward-risk ratio. Traders could gain anywhere from 1.5:1 to 4:1 reward-risk ratio using this strategy.

It is also best used in conjunction with some price action based strategies, such as breakouts and reversal patterns. This would increase the probability of a successful trade as price action traders would also be taking the same position as traders using crossover reversal strategies.

Traders using this strategy should also learn how to properly place stop losses using support and resistances or swing lows and swing highs. This would cause win rates and reward-risk ratios to vary. Stop losses that are too tight tend to increase reward-risk ratios yet cause win rates to suffer. On the other hand, wide stop losses would lower reward-risk ratios while at the same time improving win rates.

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