Technical Indicators: W
Weighted Close
The Weighted Close indicator calculates an average of each day's price. Its name comes from the fact that twice as much weight is given to the closing price as is given to the sum of the daily high and daily low. Similar indicators include the Median Price and Typical Price.
As with other price adjustment functions, the Weighted Close provides a simplified view of the day. It can be used to smooth out some of the volatility of a chart of closing prices as it includes information for the entire trading day. A Weighted Close chart combines the simplicity of the line chart with the scope of a bar chart, by plotting a single point for each day that includes the high, low, and closing price.
Use the Weighted Close anywhere a closing price or other single price field could be used. For example, it could be compared to a moving average of its value to determine when a security is trending upward or downward. The Weighted Close is calculated as:
(Daily Close * 2) + Daily High + Daily Low / 4
Wilder's RSI
The Wilder's Relative Strength Index (RSI) is a rate of change oscillator developed by J. Welles Wilder, Jr. It essentially compares the price of a stock to itself. It does NOT compare the relative performance of one stock (or market average) to another. Use this indicator to spot positive and negative divergences with price. It may also be used to determine if a stock or index has reached an overbought or oversold condition.
A reading of 70% or higher is generally an overbought position. Conversely, values near the 30% level should be considered an indication the situation has become oversold. If used as an overbought/oversold indicator, it is important to first determine whether a definable trend exists. This is best determined by using another technical indicator such as price moving averages or trendlines. After the direction of a primary trend has been successfully identified, use Wilder's RSI to trade strictly with the trend.
Wilder's Smoothing
Created by Welles Wilder, the Wilder's Smoothing indicator is similar to the Exponential Moving Average. It responds slowly to price changes compared to other moving averages. Wilder's Smoothing is used as a part of wilder's RSI.
Wilders Volatililty Index
Wilders Volatility Index is intended to measure true range over time and is sometimes referred to as Average True Range. It is the greatest difference between:
· This period's High and Low
· The previous period's Close and this period's High
· The previous period's Close and this period's Low
The discussions on Volatility (Chaikin's), Option Volatility, and Standard Deviation explain the interpretation of other volatility indicators.
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Williams %R
Williams %R is a momentum indicator that is designed to identify overbought and oversold areas in a nontrending market. Williams %R was developed by Larry Williams.
The Williams %R is interpreted similarly to the Stochastic Oscillator only plotted upside-down. It also lacks the internal smoothing found in the Stochastic Oscillator. Readings in the range of -80 to -100% indicate that the security is oversold while readings in the 0 to -20% range suggest that it is overbought.
As with all overbought/oversold indicators, it is best to wait for the security's price to change direction before making any trades. It is not unusual for overbought/oversold indicators to remain in that condition for a long time as the security's price continues to climb/fall. Selling on the first indication of an overbought signal may reduce yields as it could be some time before the price shows signs of deterioration.
An interesting phenomena of the Williams %R indicator is its ability to anticipate a reversal in the underlying security's price. The indicator almost always forms a peak and turns down a few days before the security's price follows suit. Likewise, Williams %R usually creates a trough and turns up a few days before the security's price turns up.
The formula to calculate Williams' %R is:
( Highest High in n periods - Today's Close / Highest High in n periods - Lowest Low in n periods ) * -100
Williams' Acc/Dist
Developed by Larry Williams, the Williams' Accumulation/ Distribution indicator is used to determine if the marketplace is controlled by buyers (accumulation) or by sellers (distribution) and trading when there is divergence between price and the A/D indicator.
Williams reccommends buying when prices fall to a new low yet the A/D indicator fails to reach a new low. Likewise, sell when the price makes a new high and the indicator fails to follow suit.
To calculate the Williams' Accumulation/Distribution indicator, determine:
True Range High (TRH) = Yesterday's close or today's high whichever is greater
True Range Low (TRL) = Yesterday's close or today's low whichever is less
The day's accumulation/distribution is then calculated by comparing today's closing price to yesterday's closing price.
If today's close is greater than yesterday's close: Today's A/D = today's close - TRL
If today's close is less than yesterday's close: Today's A/D = today's close - TRH
If today's close is the same as yesterday's close then the A/D is zero.
The Williams' Accumulation/Distribution indicator is a cumulative total of the daily values:
Williams A/D = Today's A/D + Yesterday's Williams A/D
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