The binary options’ indicator which we consider in this article is indicator of a particular interest. This is so because it shows the overbought and the oversold zones. It also belongs to the oscillators’ category and was developed by the famous professional of the technical analysis Larry Williams in the 70s’ of the previous century. This indicator is based on the determination of the closing price in relation to the extreme points of the trading range.
Description of Williams percent range binary options’ indicator
This indicator is the dynamical one by its essence. It is based on the oscillators’ principle and is slightly similar to the well-known Stochastic. But the Stochastic slightly differs because the comparison is carried out according to the relation of the closing price to the minimal values for the particular time interval. For this reason, the Williams %R binary options’ indicator is frequently used in order to determine when the particular underlying asset was overbought or oversold.
The unique character of this indicator consists in the fact that it can be used for different timeframes, and it fits many traders because there are short-term, mid-term, and long-term speculators among the users of this indicator. However, as the statistics shows, the binary options’ traders work only with the 10-minute expiration time.
Any period for calculation can be used here, but the period of 14 is used usually. However, if a trader wants to set the indicator to make it more sensitive, it can be done easily. The line of the Williams %R binary options’ indicator is located between the levels 0 and -100 on a chart.
Any current range maximum shows that the buyers are strong in the market. Alternatively, any minimum means that the sellers are strong. The most important parameter here is the closing price because it shows which players are prevailing currently. At the same time, the Percent range binary options’ indicator compares closing prices of each period with the trading range and shows how much closer buyers and bears can push price towards maximums and minimums respectively.
Trading signals of Williams price range binary options’ indicator
The first type of trading signals we will consider for this binary options’ indicator is called the divergence. This is the strongest signal. If a divergence appears, then there will be the definite reverse in the market soon. There is no need to explain what the divergence between the underlying asset’s price and the indicator’s showings is, because we have considered this matter repeatedly. For this reason, we’ll only note that if the bearish divergence appears on a chart, then the opportunity to buy the Put option will appear. On the other hand, if the signal of the bullish divergence appears on a chart, the signal to buy the Call option will appear.
Another type of signal that can be received using the Williams percent range binary options’ indicator is the overbought or the oversold signal. When the indicator’s line appears above the -20 zone, an underlying asset is located in the overbought zone. Therefore, a high probability of a reverse down exists. For this reason, if the level of -20 is crossed from up to down, you can buy the Put option. And if a line is located below the -80 zone, it means that an underlying asset is oversold currently. For this reason, after the line is crossed from down to up, you can buy the Call option.