Williams’ Percent Range (%R)

Williams’ Percent Range, or %R for short, is a technical indicator developed by Larry Williams in 1973. It is a simple but efficient oscillator that shows how fast the price is moving.

How to implement.

%R is included in the platform’s default indicator set, so you do not need to download it. Go to “Indicators” and type Williams and select the first option. By default, the indicator period is 14. You can change this parameter if necessary.

How to interpret.

Williams %R is a momentum oscillator. It looks a lot like the Stochastic Oscillator. The difference between them is that Stochastic compares the opening and closing prices of different periods, while %R uses only the closing price and compares it with the high-low range during a specific period. Unlike the Stochastic Oscillator, the range of the Williams %R is not from bottom to top but from top to bottom. This means that the lowest values of the indicator are at the top of the indicator window and the figures increase in descending order as the indicator line moves from top to bottom. Therefore, level 0 is at the top and value -100 is at the bottom.

%R shows when the market is overbought or oversold. If %R is between -100 and -80, the market is oversold and you should start thinking about buying. If %R is between 0 and -20, the market is overbought and you should start thinking about selling. Keep in mind that an overbought or oversold reading does not mean the price will reverse. Overbought simply means that the price is near the highs of its recent range, and oversold means that the price is at the lower end of its recent range. As a result, it is not advisable to use this type of signal as our only cue to enter the market. Remember that this indicator requires confirmation of price action or other technical analysis tools.

One of the simplest and most efficient filters is to look for a situation where the price breaks out of the oversold area during an uptrend. This could be your buy signal. In turn, if there is a general bearish trend, confirmed by visual analysis or indicators, look for the price to break out of the overbought zone to initiate a sell operation. With this type of strategy, you can combine Williams %R with indicators such as Bollinger Bands or Envelopes.