Williams %R

What is Williams %R and how to use it

What is Williams %R?

Williams %R, also known as the Williams Percent Range, is a momentum oscillator that measures overbought and oversold levels in a market. It compares the current closing price to the highest high and lowest low over a specified period, providing insights into the market's relative positioning within that range. The indicator ranges from 0 to -100, with readings above -20 indicating overbought conditions and readings below -80 indicating oversold conditions.

Who made Williams %R?

Williams %R was developed by Larry Williams in 1973, and was introduced in his book "How I Made One Million Dollars Last Year Trading Commodities."

How is it calculated?

%R = (Highest High - Close) / (Highest High - Lowest Low) * -100

Where:

• Highest High is the highest price over the lookback period.

• Lowest Low is the lowest price over the lookback period.

• Close is the most recent closing price.

Code (ProRealTime)

How do you use Williams %R?

You can use the Williams %R Oscillator in several ways to identify overbought and oversold conditions, gauge momentum, and spot potential reversal points.

Overbought/Oversold Conditions:

• Overbought: When the Stochastic Oscillator rises above 80, it typically indicates that the asset is overbought and may be due for a pullback.

• Oversold: When the Stochastic Oscillator falls below 20, it typically indicates that the asset is oversold and may be due for a rebound.

Momentum:

You can use Williams %R in several ways to make trading decisions:

Overbought/Oversold Conditions:

When the Williams %R is above -20, it indicates overbought conditions, suggesting that the asset may be due for a pullback. When the Williams %R is below -80, it indicates oversold conditions, suggesting that the asset may be due for a rebound.

Divergences:

• Bullish divergence: Occurs when the price makes a new low but Williams %R forms a higher low, indicating weakening bearish momentum.

• Bearish divergence: Occurs when the price makes a new high but Williams %R forms a lower high, indicating weakening bullish momentum.

Trend Confirmation:

Williams %R can also be used to confirm the strength of a trend. During a strong uptrend, Williams %R often remains in the -20 to -50 range. During a strong downtrend, it often stays in the -50 to -80 range.

Signal Generation:

Enter long positions when Williams %R moves below -80 and then rises above it, and enter short positions when Williams %R moves above -20 and then falls below it.

FAQ

Q: Is Williams %R a leading or lagging indicator?

A: Williams %R is a leading indicator. It helps predict reversals by comparing the current closing price to the high and low prices over a specified period.

Q: What are the best settings for Williams %R?

A: The default setting for Williams %R is usually 14 periods, but you can adjust it to suit your trading style. Shorter periods can give more signals, while longer periods smooth out the indicator.

Q: Can Williams %R be used alone to make trading decisions?

A: Williams %R can give you some good signals, but it's usually better to combine it with other indicators to confirm trends and avoid false signals.

Strategies using the Williams %R indicator

• None so far.