Williams suggests the following regarding buy and sell signals...
1. Buy on positive divergence where the low of the oscillator has dipped below 30.
2. Sell on negative divergence where the high has exceeded 50.
3. Close long positions when the oscillator exceeds 70.
4. Close short positions when the oscillator goes below 30.
Daily bar chart of Apple Computer. Note the strong buy signal (positive divergence) in early September.
Created using Analyst from Trendsetter Software.
Time is one of the most critical elements in creating a oscillator. Williams chose three different time periods for his oscillator as they generally have been the most dominant time cycles in the market. He based his oscillator 7, 14 and 28-day measurements of accumulation and distribution as he had found those time periods were generally the ones that give the moves most traders wish to trade.
© 2017 Trendsetter Software, Inc.