TOP 3 INDICATOR BOOT CAMP: PERCENT R

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Cory Gilbert
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1 BIGTRENDS.COM TOP 3 INDICATOR BOOT CAMP: PERCENT R PRICE HEADLEY, CFA, CMT Let s Get Started! Educate Understand the tools you have for trading. Learn what this indicator is and how you can profit from it with our unique tactics. Explore Put your knowledge into action. Practice and start using your new trading tools to find and trade opportunities Execute Never trade alone. Join us in our trading workshops to maximize your new found expertise. We ll trade with you.

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What is Percent Range (%R) Critical Technical Analysis Tool Percent

Finds overbought/oversold areas Is built upon the Philosophy: The

weakest trends are when a stock is at or near recent lows The BigTrends

3 What is Percent Range (%R) Critical Technical Analysis Tool 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.

4 Williams Percent R The BigTrends Approach 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.

Percent R Conventional vs. BigTrends Larry Williams Created the Williams Percent R indicator. Used 14-Bar setting. Scale was 0 to -100. Oversold Level: - 80. Overbought Level: -20.

5 Percent R Conventional vs. BigTrends Larry Williams Created the Williams Percent R indicator. Used 14-Bar setting. Scale was 0 to Oversold Level: 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. BigTrends Adapted Percent R to improve efficiency. Use 30-Bar setting. New Scale: 0 to 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.

Williams %R Refresher %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

6 Williams %R Refresher %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) Page 6

7 Percent Range Conventional vs. BigTrends

8 Finding Confirmation When does a trend really start? 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

9 Percent R Bull Confirmation 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.

10 Percent Range Breakout

Percent R Bull Retest BULL RETEST: Once trend is Bull Confirmed Look for a move below the overbought reading under 80 (at 79.

11 Percent R Bull Retest BULL RETEST: Once trend is Bull Confirmed Look for a move below the overbought reading under 80 (at 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 Page 11

12 Percent Range Retest

13 Percent R Bear Confirmation 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. Page 13

14 Percent Range Breakout

Percent R Bear Retest BEAR RETEST: Once trend is Bear Confirmed Look for a move above the oversold reading over 20 (at 20.

15 Percent R Bear Retest BEAR RETEST: Once trend is Bear Confirmed Look for a move above the oversold reading over 20 (at 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 Page 15

16 Percent Range Retest

Three New Methods for Percent Range Understand the Differences Methods vary in trend trading theory Phantom Retest It is possible to have a retest intra-bar, but by the close it is gone.

17 Three New Methods for Percent Range Understand the Differences Methods vary in trend trading theory Phantom Retest 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. Bend But Don t Break 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 intrabar, 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 50 Level Cross 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

Phantom Retests Critical Technical Analysis Tool Phantom Retests Once you have mastered the Percent Range breakout and retest methods, you will see other chart patterns.

18 Phantom Retests Critical Technical Analysis Tool 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.

19 Percent Range Phantom Retests

20 Percent Range Phantom Retests

21 Percent Range Phantom Retests

22 Bend But Don t Break (BBDB) Critical Technical Analysis Tool BBDB Once you have mastered the Percent Range breakout and retest methods, you will see other chart patterns. 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.

23 Percent Range BBDB

24 Percent Range BBDB

25 Percent Range BBDB

26 Percent Range Retest

27 50 Level Cross Critical Technical Analysis Tool 50 Level Crosses Once you have mastered the Percent Range breakout and retest methods, you will see other chart patterns. 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.

28 Percent Range 50 Level Cross

29 Percent Range 50 Level Cross

30 Percent Range 50 Level Cross

31 Percent Range 50 Level Cross

32 Staying With Winning Trades Trade Management 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

The Closing Stop Critical Options Principle Stops To prevent being stopped out by intraday noise, Use the concept of a stop only at the end of a given bar.

33 The Closing Stop Critical Options Principle 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.

Percent R as our indicator to identify strong trends Once a trend is confirmed, you

34 Exploring Stock Substitutes Focus on Execution 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

35 Stocks Substitute Bull Trades Stock Trade Buy 100 ABC $37.48 Cost = $3,748 Stock goes to $48.83 Long Shares gain $1135, or 30.2% ROI Option Trade Buy 1 ABC Delta of 0.69 Cost = $550 Stock goes to $48.83 ITMs reach $14.50 gain $900, or 163.6% ROI

36 Stock Substitute Bear Trades Stock Trade Short 100 XYZ $57.38 Cost = $5,738 Stock goes to $47.82 Short Shares gain $956, or 16.6% ROI Option Trade Buy 1 XYZ Delta of 0.76 Cost = $860 Stock goes to $47.82 ITMs reach $18.90 gain $1030, or 119.7% ROI

37 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

38 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

Technical Analysis Indicators

Technical Analysis Indicators William s Percent R Rules, Scans, Adding Filters, Breakout, Retest, and Application across MTFs Course Instructor: Price Headley, CFA, CMT BigTrends Coaching Access to BigTrends