Crypto trading has seen rapid growth in the past few years, with more and more people joining in. However, not everyone’s investment strategy is the same. Cryptocurrency trading is a relatively new industry, and like any other, there are several strategies to use. One of these is the Williams R indicator. Dr. Robert G. Williams created the indicator out of his own trading experience. The name comes from his mentor, Dr. Charles Schwab.
Not everyone’s investment strategy is the same
What does this mean? The Williams R indicator focuses on aspects related to the price of a coin more than other indicators do; it gives more weight to past trading data and how that data has affected the price in recent instances compared with other popular indicators like Coinigy or CoinMarketCap’s Average Sentiment Score (ASX). As a result, the Williams R indicator has become a useful tool for crypto trading.
But what are its limitations?
Susceptibility to over-reacting to fast changes in prices
Despite all its positive points, however, the indicator does have a few limitations that a potential user must be aware of. One of these is its susceptibility to overreacting to fast changes in prices. If a price moves too fast to keep up, it will still register as an up or down movement. This means you’ll have to adjust your strategy to make sure you use this indicator correctly. Some traders even use multiple indicators at once to find the best results.
Best suited for traders who invest in a buy or sell strategy only
Another limitation comes in the form of its use with other trading strategies. The Williams R indicator is best suited for traders who only invest in a buy or sell plan. It can be used with both techniques, but it will not be as effective using a strategy that involves both buying and selling. For this reason alone, it’s best to look at other indicators if you want to trade in an attempt at long-term investment strategies and strategies involving multiple exchanges as well as multiple coins. Nevertheless, it is definitely worth looking into if you are interested in using a single indicator on your own or with someone else to attempt some successful trading.
The indicator cannot be traded using automated trading strategies
Another limitation of the Williams R indicator is that it cannot be traded using automated trading strategies. Most trading strategies use significant figures, such as the Average Sentiment Score, and the indicator cannot react to these figures in real-time. Although a trader can increase the reaction time of the indicator to act on these figures faster, it’s still not possible for an automatic trading strategy to make use of this indicator’s functions at this point. It is best used with manual trading strategies only.
Not as effective when you are trading in markets that have a lot of volume and frequent price changes
Another limitation is that it’s not as effective when you are trading in markets with a lot of volume and frequent price changes. This means that you should be more cautious if you use it on an exchange with high volumes and frequent price movements like Binance, Bittrex, and others. These exchanges provide a much more accurate price change classification method than Poloniex, Coinbase, Kraken, and others.
Slightly more unstable than other indicators
One of the main reasons this indicator is more unstable is that it has to react to changes faster than other popular indicators. This means you have to increase the frequency of your trades or increase the time frame for which you are searching. This will increase trade stability, but not necessarily accuracy.
The indicator can be unreadable when there’s heavy trading volume
When there’s a lot of trading volume, the Williams R indicator can become unreadable at times because it doesn’t react quickly enough. This can be a problem for traders who rely on the indicator and have no other indicators to use as a backup or supplement.
It can be hard to use when you’re trading on low-activity markets like Poloniex, Bittrex, CryptoBridge, and others
Low-activity markets cause the indicator to have problems in terms of reacting correctly. This means that you’ll have to adjust your time frame or wait until another cryptocurrency comes into play so that it becomes more active and easier to use.
Not as effective in a long-term investment strategy as other indicators
As a result of the indicators being more sensitive to fluctuations and price changes, it’s not as effective in long-term investment strategies. This is why many expert traders recommend using it only when there is a clear trend, and you know how to read the Volatility Indicator.
The indicator can easily be gamed by large investors
The indicator can easily be gamed by large investors who want to trick smaller investors into thinking that the price change is an up or down movement in the opposite direction of what they want. This can be used to trick smaller investors into selling or buying a coin from them, and then they can gain a more significant profit than if they had waited for the price of the coin to change on its own.
The indicator can be hard to decipher at first
The indicator requires a lot of experience to read it correctly. This is not enough even if you master every aspect of how it works and reacts to price fluctuations. The indicator has become popular with traders because some have developed patterns that help distinguish real trends from false ones. Some of these patterns are based solely on experience.
In conclusion, the indicator is better than most other trading indicators and deserves recognition among crypto traders. It also helps traders avoid overreacting to sudden price movements and predict future price movements in the crypto industry. For those who are interested in using this indicator, it’s best to make sure you do so correctly and with an eye on the limitations just outlined.