Williams %R – Williams Percent Range

The Williams’ Percent Range is similar to the Stochastic Oscillator. Known also as the William’s %R, this technical tool allows traders to gauge raw momentum in the market.

The Williams’ %R differs from other oscillators in that it is not already smoothed by a simple moving average. Also, the scale for the Williams Percent Range is naturally inverted; all readings on this oscillator are negative. Do not be confused by the negative readings; it means very little to how the indicator works and does not affect trade outcomes.

Williams’ Percent Range as an Indicator

Williams’ Percent Range indicator can range between all values from 0 to -100. A reading of 0 to -20% indicates that the market is overbought. A reading between -80 and -100% suggest that the market is oversold.

Traders favor the Williams’ %R because of its ability to spot reversals well before they happen. Smart traders should do their best to avoid entering before the reversal begins, however, the %R is extremely accurate at picking tops and bottoms. When the %R indicator peaks in the oversold range, traders should buy on the confirmation of changing momentum and vice versa.

Do note that like many oscillators, the Williams’ Percent Range is prone to picking tops several periods before they happen. The RSI is similar in this regard, as it also has a tendency to point toward overbought or oversold levels before the correction begins.

Williams’ %R Calculation

The calculus for this indicator is fairly straightforward. Below you’ll find the equation for calculating the %R reading for an individual period:

%R = (High(i-n)-Close)/(High(i-n)-Low(i-n))*100

Close is the closing value for the period.
High(i-n) is the highest value a currency pair touches over a number of periods.
Low(i-n) is the lowest value a currency pair touches over a number of periods.

Interpret the Williams’ %R

Traders can use the Williams’ %R for very raw momentum analysis. As stated previously, the %R is not already smoothed with a moving average, so the readings change quickly. Using the %R on a longer timeframes is preferred. This indicator can be used for short-term trading to quickly evaluate the where the next momentum shift will occur, and in what direction.

Complement the %R with a lagging indicator and you’ll be well suited to take on the market. Or, if you so desire, use the %R as a straight indicator but offset it by a few periods to make up for its fast response to changing market conditions.