What is Williams %R?

Williams %R (or %R) is a technical analysis tool (momentum oscillator) created by Larry Williams in 1973. It is used to determine overbought/oversold market levels but may create also buy/sell trading signals.

Williams %R is similar to the Stochastic Oscillator except for the fact that Williams %R has an upside-down scale and takes values from -100% to 0%. Williams %R measures the close levels relative to the highest high for a certain period. Stochastic Oscillator measures the close levels relative to the lowest low for a certain period.

 

Williams %R Default Setting

The default setting for Williams %R is 14 periods.

 

Williams %R Price Range & Explanation

Williams %R values are corresponding to a range from 0% to -100%.

◘ Values from 0% to -20% are indicating overbought market levels

-When Williams %R = 0% then the last close is equal to the highest price level for the period

◘ When Williams %R is at -50% then a new trend is expected to be formed

◘ Values from -80% to -100% are indicating oversold market levels

-When Williams %R = -100% then the last close is equal to the lowest price level for the period

In the following chart, we may see the indications of Williams %R (14 periods) on EURUSD related to the indications of Stochastic.

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Chart: Williams %R & Stochastic

 

Williams %R Trading Signals

1) When Williams %R is at -100% oversold levels are indicated but not a buy signal.

Instead, a buy signal occurs when Williams %R reaches -100%, and after some closings, it rises above -95% or even -85%.

2) When Williams %R is at 0% overbought levels are indicated but not a sell signal.

Instead, a sell signal occurs when Williams %R reaches 0%, and after some closings, it drops below -5% or even -15%.

 

Williams %R Calculation

The calculation of Williams %R is similar to the Stochastic Oscillator:

  • Williams %R = (Periodic HIGH -CLOSE) / Periodic HIGH – Periodic LOW)*100

 

Williams %R Confirmation

Williams %R may be confirmed mainly using Volume Activity Indications and important Support & Resistance Breakouts.

 

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Read More: » What is Stochastic Oscillator | » What is Pivot Point | » What is RSI | » What is MACD  | » What are Round Numbers? | » What is the Fibonacci Retracement | » Technical Analysis Map

 

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