Signup for our free newsletter:

The R-4 Trigger System

Written By Brian Hicks

Posted December 8, 2010

I don’t care what kind of trader you are…

If you don’t have a system in place, you’re blindly throwing money at the market, hoping for the best. We learned that the hard way in the beginning.

But after developing two of the easiest trading systems around — our news-based system and the R-4 Trigger System — the gains have been non-stop…

Take a look at the iShares Silver Trust (ETF)

On November 18th, we bought the iShares Silver Trust (ETF) February 25 calls after the underlying stock hit its trend line and bounced up.

Plus, on a six-month candlestick chart with MACD, DMI, and Williams % Range (W%R) showing oversold reads, we caught a long-legged doji followed by a doji reversal candlestick right next to it — at the bottom of a recent sell off.

That was our turnaround signal.

Fourteen trading days later, we walked with 140% gains.

What we did here wasn’t a fluke. It was simply another trade that met our technical parameters.

Without that system in place, that 140% gain was nothing more than a pipe dream…


But that’s not where this story ends.

Hours after taking that 140% SLV gain, we went short SLV with the February 2011 29 put at $2.

And we couldn’t have timed it better…

An hour later, the stock did just as we called for. It plummeted.

Again, this wasn’t a fluke event. Sure, we had the rumors of a possible weekend rate hike out of China, but take a look at the technicals here.

Every time, the underlying SLV stock crossed above the upper Bollinger Band, met by an oversold read on W%R, we got our selloff. It happened at the beginning of November — and it happened again just yesterday.

While we weren’t expecting such an explosive move so fast, we still caught a 35% gain in less than a day. A typical trade usually lasts up to a month — at most.

Here’s the trick to the R-4 Trigger System

Excluding the news-driven strategy, focus on three things for today: Bollinger Bands, candlesticks, and Williams % Range.

I rattled some of these terms off earlier; if your head was spinning, fear not.

For those of you that aren’t familiar with the terms doji, Bollinger Band and W%R, here’s a quick tutorial:

  • Dojis usually appear at times of market indecision and have called key reversals in indices and individual stocks.

  • W%R (or Williams % Range) is the ultimate momentum indicator that signals oversold and overbought conditions. W%R shows an overbought condition with a numerical range read of 0% to 20%. Oversold conditions are measured with a numerical range read of 80% to 100%.

  • As for Bollinger Bands (plotted at standard deviation levels above and below moving averages), stock prices tend to stay within the upper and lower bands. So, when the prices (in this case with the Dow) move above the upper Bollinger Band, are coupled with a bearish candlestick read (gravestone doji, for example), and an extreme overbought W%R read is present, we expect a reversal at the top.

Okay, but what’s a doji?

The profit stars, more commonly known as dojis, are commanding reversal signals. These are formed when the candlestick opens and closes at the same level, implying indecision in the stock price.

 doji stars

We’ll discuss these in further depth in the report we’re putting together. I just want you to have a general sense of what dojis can look like.

The Bollinger Bands

For our purposes, I’ll make this simple. When we use the Bollinger Bands, the closer the market prices move to the upper Bollinger Band, the more the stock market is considered overbought. The closer the prices move to the lower Bollinger Band, the more the stock market is considered oversold.

Finally, the Williams Percentage Range (W%R)

The third component of the trade is to find an overvalued W%R read, or a chart where the W%R has peaked. According to the W%R, values of 80% to 100% indicate an oversold condition. Values of 0% to 20% are overbought.

Interesting to note: W%R has the ability to anticipate reversals. The indicator will oftentimes peak and turn down days before the stock peaks and turns down. It does the opposite with upside.

The R-4 Trigger

There is no such thing as the “perfect” trading system; trading strategies are nothing more than building blocks to the next one…

And after years of pain-staking research, wild success, and colossal failures tucked in between, I learned that lesson the hard way.

But this time around — just using the three indicators I explained today — I’ve developed a system that’s been producing a win rate of about 80%.

But imagine the profit possibilities when you add in our news-driven and other technical indicators to the fray…

We’re putting the finishing touches on our complete R-4 Trigger report as we speak — and it’s free to readers of Wealth Daily — so keep an eye on your inbox.

Stay Ahead of the Curve,

Ian L. Cooper
Editor, Wealth Daily