Definition:
The Williams’ Percent Range technical indicator, sometimes referred to as the Williams %R or just the %R oscillator, has considerable similarities to the Stochastic Oscillator. This useful oscillator was originally developed by Larry Williams to help traders identify when the market is nearing overbought or oversold extremes.
In essence, the Williams %R indicator plots the relationship of the market’s closing price relative to the range seen over a given time frame. The indicator’s scale customarily ranges from 0 to -100, and it gives an overbought reading for levels from -20 to 0 and an oversold reading for levels between -80 to -100.
The %R indicator also has an especially good reputation for turning down just before a major peak or turning up just before a major low, making it a useful leading technical indicator of price action.
Sample Chart:
Usage:
The most common usage for the Williams %R indicator among traders is to identify extreme price action where the market is overbought or oversold as follows:
Most traders using the Williams Percent Range indicator also prefer to wait until the market price action has reversed direction prior to establishing a position based on this indicator.
For example, if the Williams %R shows a reading of -15, you would not sell into that strength until the price had shown some downside action first. One way to do this would be to wait for it to return from overbought territory and sell at the point where it crosses the -20 boundary.
Calculation Method:
Define:
- n = the number of the time period bar in question.
- N = the number of time periods observed.
- High(N,n) = The highest high price seen over N time periods at time n.
- Low(N,n) = The lowest low price seen over N time periods at time n.
- Close(n) = The closing price at the end of time period n.
- %R(n) = The Williams Percent Range at time period n.
Calculate:
- %R(n) = [High(N,n)-Close(n)]/[High(N,n)-Low(N,n)]*100
Practice William's Percent Trading
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