On my last post I mentioned that the model I used for the prediction combined Williams %R and the ADX. So I figured I should explain what those are, which I’ll begin doing for any of the indicators I use, that should build up an index of them on here too.

Williams %R - is a measure of how overbought or oversold the stock is. It uses the high and low over past x periods and recent close to create a scaled indicator between 0 and -100. Generally 0 to -20 indicates overbought and -80 to -100 indicates oversold. The formula is

%R=[(Recent High - Close)/(Recent High - Recent Low)] * (-100)
note: recent is defined by whatever length you want to consider, most common period is 14 days.

ADX - is an indicator that measures the strength of a recent trend. It is scaled from 0 to 100. Generally a move above 20 is considered a start of a new trend, and a move below 40 indicates the end of a trend.

When used in NeuroShell the program optimizes the parameters. Combined they seem effective, this is probably because they provide different information. Williams %R indicates a potential direction while ADX indicates the strength of this movement.