Welcome to the Stock Trading Starter Pack from Larry Williams. This StockChartsACP plug-in features six unique stock trading tools developed by Larry Williams - the same indicators he uses in his own trading. Each indicator serves a specific and separate purpose; together, these tools can help you find winning trades and set entry/exit points. All of these indicators work on daily and weekly bars, and Larry uses one on intraday charts as well.
Check out our Larry Williams Stock Trading Starter Pack overview video below, or just read on to learn how to get the most out of this plug-in.
Most stocks and commodities have seasonal influences, and chartists can take advantage of those seasonal patterns. Larry Williams wrote the first book on seasonal influences back in 1973, and developed the Williams True Seasonal indicator to show you the true seasonal pattern for a security.
What sets it apart from other seasonal indicators is that it does not use out of sample data. For example, if you are calculating seasonal data for 2007, it should only be calculated with data up to 2007. Many other seasonal indicators include data from after 2007 for calculating that 2007 seasonal value. Williams True Seasonal uses only data up to the date being calculated, making for a more accurate picture of seasonality.
This indicator can be used on daily and weekly charts. Selloffs typically happen around the high of the season, and rallies around the low of the season. Use this indicator on longer-term charts to determine when the seasonal value is higher or lower than usual and set entry/exit points based on that information. On daily charts, use the indicator to look for price performance that is better or worse than expected compared to the seasonal value, and also to determine typical high/low points for the season.
The default lookback period for the Williams True Seasonal is 1 year, but that only gives you one data point for each day of the year, so Williams strongly recommends increasing that number.
Advisor sentiment can help call market tops and bottoms. When too many advisors are too bullish, stocks usually decline. When too many are bearish, stocks rally.
Larry Williams' original sentiment index was first introduced in Bloomberg's 2000 book New Thinking in Technical Analysis and measures the number of advisors who are currently bullish or bearish on markets, futures, individual stocks, and more. The new and improved Williams Sentiment Index tracks the same sentiment data, but is more responsive than the original.
The Williams Sentiment Index can be used on weekly or daily charts. When the Sentiment index rises above the blue line, this is a signal to sell; conversely, when it drops below the red line, this shows strong bearish sentiment and is a signal to buy. By default, those thresholds are set at 75 and 25, but can be adjusted to meet your trading needs.
Make no mistake about it - large pools of informed money are active in the stock and commodity markets. After studying the Commitments of Traders Report for almost 50 years, Larry Williams figured out how to tell when smart money is buying or selling a security.
The Williams Money Flow Index determines whether institutional investors are buying or selling a specific stock or future, and can be used to help set the timing of entries and exits. When the index is high, the security has been under accumulation, which can indicate that a rally is coming. When the index is low, there has been low acquisition (or even distribution) of the security, which signals a possible decline.
The Williams Money Flow Index can be used on daily or weekly charts. When the indicator value rises above the green line, that is a signal to buy; when it falls below the red line, that is a signal to sell. By default, those thresholds are set at 74 and 26, but can be adjusted to meet your trading needs.
Institutional buyers usually make their move before the rest of the buyers, so it is useful to know whether the pros are buying or selling. The On Balance Volume indicator measures buying and selling pressure using volume and price, but volume can be very misleading in stocks and futures. Williams Insider Accumulation Index resolves that issue by taking volume out of the equation.
When price rallies without support from insiders (as measured by this index), a decline is likely to follow. When the index looks stronger than the price action, the security is under accumulation and a rally is expected. Look for divergences between price and the indicator.
The Williams Insider Accumulation Index is used on daily charts. By default, it is set to 14 periods, but can be adjusted to meet your trading needs.
The performance of stocks, futures, and indexes are somewhat cyclical, and those cycles can be used to predict likely tops and bottoms. The Williams Cycle Forecast is a unique “look forward” tool that combines the three most reliable short-term cycles, balances them against one another, and gives a forecast of where prices will most likely go in the coming three months.
Simply add the indicator to your chart, see where the peaks and troughs line up between price and the indicator, then look ahead to see if any price trend reversals are expected in the future.
The Williams Cycle Forecast is used on daily and intraday charts. The default displacement value is 66 trading days (approximately 3 months), but can be adjusted to find a better cycle match for the specific security being studied.
Trend identification is an important part of successful trading, but it can be difficult to identify the trend. WillTrend is a clear-cut trend identification tool that can be used to determine trend direction and identify entry and exit points.
WillTrend overlays a green line on the chart. The security is in an uptrend when price is above the green line, and in a downtrend when price is below the green line. Look for price crossovers to indicate a change in the trend. WIllTrend is not as prone to whipsaws as other trend-following systems.
WillTrend can be used on charts of any timeframe, including intraday charts. On a weekly chart, WillTrend clearly identifies the trend of the market. On a daily chart, WillTrend shows you entry and exit points.
Investors can tell when a stock is over/undervalued based on fundamental data, such as price-to-book ratios, price-earnings ratios, etc. Commodities, however, do not have a similar fundamental indicator of valuation. In 1990, Larry Williams developed the WillVal indicator, which can be used to determine whether any actively-traded security (including commodities) is over- or under-valued by comparing its performance relative to a benchmark over time.
The WillVal indicator uses a security's valuation to identify buy and sell signals. When the indicator value is below the lower green line, the security is undervalued; when it crosses back above that lower line, that is a buy signal. Conversely, values above the upper green line indicate that the security is overvalued and should be sold.
The WIllVal indicator can be used on daily or weekly charts. By default, the upper (overvalued) line is set at 75 and the lower (undervalued) line is set at 15, but these thresholds can be adjusted to meet your trading needs. Similarly, the length of the look back period (65 periods by default) and the benchmark (either TLT, GLD, or UUP) can be adjusted depending on the security you are analyzing.
The original VIX was based on options prices and only focused on volatility in the US stock market as a whole. Larry Williams' synthetic VIX (the VIXFIX) was developed in 2008 to broaden the scope of this indicator. The VIXFIX can be calculated without using options values, so the formula can be applied to any market index, individual stock, or commodity.
The VIXFIX can be used to identify market turns for any security. High volatility in a downtrend can signal an upcoming market bottom; conversely, low volatility often corresponds with a market top.
The VIXFIX can be used on daily or weekly charts. By default, the VIXFIX looks back 22 periods (the max number of trading days in a single month), but this number can be adjusted to meet your trading needs. You may wish to adjust the number to 26 periods (6 months) on a weekly chart, for example.
Larry Williams' Pinch/Paunch indicator looks for a downtrend that has played out and is preparing to rally.
The Pinch/Paunch indicator can be used on daily or weekly charts, and is helpful for identifying buying opportunities in a downtrend. When the indicator rises above 40, this indicates that conditions are ripe for a rally; the buy signal comes when the indicator value starts to drop again after crossing above 40.
Note that this indicator is for use in downtrends; when the same cross above 40 and subsequent drop occur during an uptrend, it's not necessarily a buy signal.
StockCharts and many other charting services include the traditional advance decline line, showing the number of stocks on the NYSE that have gone up (advanced) or gone down (declined) in price each day. Larry Williams' version of this market indicator removes many NYSE stocks that rarely have significant moves, focusing on a smaller set of NYSE stocks that really drive the market action. The result is a more responsive version of the market indicator that gives more significant buy and sell signals.
The Williams Advance/Decline Line can be used just like a more traditional version of this market indicator, to show the level of participation in a market move. Since it covers the NYSE, it is best used on daily charts for US stock market averages. Larry recommends overlaying the AD Line on the price plot for the market average, then looking for divergences between the two.