The William %R, also known as the William percentage is an indicator series that is a popular member of the “Oscillator” family of technical indicators. Traders use the indicator to determine whether a market is overbought or oversold by moving between 0 and -100 levels. With Williams % help, traders can identify entry and exit points in the market.
The indicator as developed by a well-respected trader Larry Williams is used similarly to the stochastic oscillator. Williams %R compares the closing price of a stock to the high/low over specific periods, usually set at 14 days or periods.
Features of The William %R
• Periods
• Maximum high
• Minimum low
• Closing price
Calculation of The William %R
The Williams %R is calculated similarly to the Stochastic Oscillator, which includes the following formula: (Click this link to access an economic calendar for your trading strategies )
%R = -(MAX (HIGH (i – n)) – CLOSE (i)) / (MAX (HIGH (i – n)) – MIN (LOW (i – n))) * 100
Where:
Period, typically 14 days.
CLOSE (i) — Most recent closing price.
MAX (HIGH (i – n)) — the highest maximum over a number (n) of previous periods.
MIN (LOW (i – n)) — the lowest minimum over a number (n) of previous periods
Interpretation of the Williams percentage
The indicator tells a trader when the current price is relative to the highest high over the last 14 periods or the numbers of periods picked. An overbought price signal is indicated when the indicator reads between – 20 and 0. It might also mean that the price is near the high of its recent price range. With a reading between -80 and -100, it is an indication that the price is overbought or far from its recent high.
In case of an uptrend, traders can wait for the indicator to move below -80. When price starts rising, the indicator starts moving up to -80, indicating an uptrend is starting again.
Using the same concept, a downtrend can be depicted. When the indicator is above -20, and the prices start falling with the Williams %R moving back below -20, it is an indication of a downtrend.
The Difference between Williams %R and the Fast Stochastic Oscillator
The Williams %R shows a representation of the difference between the market’s closing level and the highest high for the look-back period. On the other hand, fast Stochastic Oscillator demonstrates a market’s close in relation to the lowest low, which moves between 0 and 100. The Williams %R and the Fast Stochastic Oscillator use the same principles to be their scaling.
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