Williams %R Extreme Reversal

Entry Logic

• Enter long when the Williams %R indicator moves above -80 from an extreme oversold reading.
• Confirmation is a bullish candlestick pattern on the 15-minute chart.
• Use a 15-minute timeframe for this setup.
• Entry should be above the high of the confirmation candle.
• This setup works best in a volatile, ranging market.

Exit Logic

• The profit target is the -20 level on the Williams %R indicator.
• Take full profits at the target.
• No trailing stop is used.
• Exit if the Williams %R indicator drops back below -80.
• Exit on a confirmed overbought Williams %R reversal.
• Exit if the trade is not profitable within 4 hours.
• Exit if the MACD shows a bearish crossover.

Stop Loss Structure

• Place a hard stop below the low of the extreme oversold period.
• No soft stop is used.
• Maximum dollar loss is $400 per trade.
• Maximum percent loss is 0.8% of the account.
• The structural stop is below the low of the confirmation candle.

Risk Management Framework

• Risk 0.6% of the account per trade.
• Daily loss limit is 1.8% of the account.
• Weekly loss limit is 4% of the account.
• Maximum drawdown is 12%.
• Minimum risk-reward ratio is 2.5:1.

Position Sizing Model

• Use a fixed fractional sizing model.
• No volatility adjustment is needed.
• Use 2x size for A+ setups.
• Do not scale into trades.
• Do not scale out.

Trade Filtering

• Avoid trading this setup in a strong downtrend.
• Requires a clear extreme oversold condition on the Williams %R indicator.
• Trade only highly volatile instruments.
• Avoid trading this setup during low-volume hours.
• Do not trade in choppy, sideways markets.

Context Framework

• The 1-hour chart should show a ranging market.
• Price should be trading around the VWAP.
• The setup should occur at a support level.
• The 4-hour chart should show a neutral bias.

Trade Management Rules

• Do not move the stop to breakeven.
• Take full profits at the target.
• Do not add to winning trades.
• This is a short-term, intraday trade.

Time Rules

• The optimal time to trade this setup is during the first two hours of the main session.
• Avoid trading this setup in the afternoon.
• The trade should last for a few hours at most.

Setup Classification

• A+ setup: Extreme oversold condition (Williams %R below -90), strong confirmation candle, high volume.
• A setup: Oversold condition (Williams %R below -80), moderate confirmation candle, average volume.
• B setup: Weak oversold condition, no clear confirmation, low volume.
• C setup: No clear setup, avoid.

Market Selection Criteria

• Trade volatile stocks, cryptocurrencies, and futures.
• The instrument should have a high average true range (ATR).
• The instrument should have a high level of liquidity.

Statistical Edge Metrics

• Expected win rate is 65%.
• Average win is 2.5R.
• Average loss is 1R.
• Profit factor is 1.625.
• Expectancy per trade is 0.625R.

Failure Conditions

• The strategy fails if the Williams %R indicator continues to drop after the entry.
• A common failure is a false reversal followed by a continuation of the downtrend.

Psychological Rules

• Be prepared for fast-moving trades.
• Do not hesitate to take the entry when the setup appears.

Advanced Components

• Use a volatility indicator to confirm the market conditions.
• A market internals indicator can help gauge the strength of the reversal.
• Avoid trading this setup on correlated instruments.
• The 1-hour chart must confirm the reversal.

Location

• The setup is strongest when it forms at a major support level in a volatile market.
• The setup is weakest in a slow, trending market.
• The location of the extreme oversold condition in the overall price structure is important.