back into the neutral zone from oversold levels. That’s shown by
a green icon.IF YOU WERE LOOKING to tweak the strategy further, you could run
these rules through the optimizer to confirm that the default -20
and -80 levels are the best to use given this historical data. Click
the Review button on the red toolbar. Now you’re going to add two
variables—called Overbought and Oversold—and see which levels
work best for them. Click on Add Variable in the upper left of the
screen. In the window that appears, enter “Overbought” as the
Name and “-20” as the Value. Hit Update. Repeat these steps to
add an Oversold variable with a value of -80. These should both
appear in the top right, in the Selected Factors section. Next, tweak14 months for monthly data. Scaled from zero to -100, Williams %R
uses a default overbought level of -20 and an oversold level of -80.
For more details on the strategy, click on Williams %R. In the
past decade the strategy generated 10 signals, with a winning ratio
of 70% and a profit of $199 million (based on initial capital of
$100 million) (FIG. 4). (Click on Review and then on the Simulation
Control tab to specify a strategy’s initial capital, trade size,
and more.)
The default logic for the strategy is to cover and go short
when the Williams %R line crosses below a value of -20 back into
the neutral territory from overbought levels. That signal is repre-
sented by a red icon on the chart. Conversely, a signal to cover
and go long is generated when the indicator crosses above -80
Click on the Profit
Factor column heading
to sort the strategies
by profitability.Here, the strategy
with the biggest profit
factor was Williams
%R. For more details,
click on the strategy.Fig. 3 Try implementing a technical strategy to improve performance of the overlay.
Run {.IEMCARRY Index BTST <GO>} for an overview of some popular technical strategies.Fig. 4 Williams %R, an oscillator developed by trader and technical analyst Larry Williams,
generated 10 signals over the past decade.Seven of the 10 trades
were wins, a 70% ratio.40