Larry 

Williams

In short term trading, my core idea is trend versus anti trend. The challenge is that short term traders want quick profits but can never capture the big moves, and there's a natural tension between "only trade with the trend" and the reality that markets rally when oversold and fall when overbought, which are counter moves against the trend. My solution is to work on two timeframes at once. First, I identify the longer trend with a simple moving average; the exact length doesn't matter much and none are perfectly reliable, so I use something like a 50 day just to tell me whether the market is up or down. Then I gauge the shorter term extremes with an oscillator, whether my Williams %R, RSI, or Bollinger Bands, but the length matters more than the tool, since a roughly 11 day setting captures the monthly rhythm of about 22 trading days, and ideally I tune the index to about half the cycle the market is in. I then trade the short term extreme against the direction of the counter move but in line with the major trend: when price is below a falling 50 day average, I sell overbought readings and skip the buy signals, even good looking ones, because the larger trend is down. The setup is most reliable when price is below the average and the average itself is pointing down. In essence, the moving average tells me which way the market leans, and I use overbought and oversold readings to time entries on that side.