Williams %R is a momentum oscillator that shows where the latest close sits within the recent high-to-low range. It is simple to read and simple to misuse. This guide explains the scale, how traders commonly read it and where it fails. It is educational and does not recommend any trade.
TL;DR -- Key Takeaways
- Williams %R compares the latest close with the highest high and lowest low over a lookback period.
- It runs from 0 to -100; readings near 0 are close to the recent high and near -100 close to the recent low.
- Traders often treat above -20 as overbought and below -80 as oversold, which are conventions to test.
- In a strong trend it can stay at an extreme for a long time.
- Require confirmation and test the rule before using it with money.
1. How Williams %R Is Calculated
The indicator takes the highest high and lowest low over a chosen number of candles, then shows how far the latest close is below the highest high, as a share of that range, on a scale from 0 to -100. A reading of 0 means the close is at the top of the recent range; -100 means it is at the bottom. It is closely related to the stochastic oscillator, which uses a similar idea on a 0 to 100 scale; see stochastic oscillator explained.
2. Reading the Scale
A common convention treats readings above -20 as overbought and readings below -80 as oversold. A lookback of 14 candles is a frequent default. These values are starting points that traders test, not guarantees that price will turn. More background is in CCI and Williams %R.
3. Ways Traders Use It
- Range reversals: looking for a move back from an extreme when price is in a range.
- Momentum shifts: watching for the line moving out of an extreme zone.
- Divergence: noting when price makes a new high but the indicator does not.
Each of these needs a written rule and a test. See indicators for reversal signals.
4. Where It Fails
In a strong trend the line can stay near an extreme while price keeps going, so an overbought reading is not a sell signal by itself. It is also sensitive to the lookback: a short period gives many noisy swings and a long period gives few signals. Using it on every market condition is the usual source of losses; see indicators for trending vs ranging markets.
5. Adding Confirmation
Pair it with a different kind of evidence, such as a trend filter or a price level, and wait for the candle to close. See indicator signal confirmation rules. Avoid stacking it with the stochastic oscillator, which measures nearly the same thing.
6. Testing It
Write the rule, including expiry, record each signal on a demo account with the real payout and compare with the break-even rate. Keep settings fixed during the test and review the sample size; see sample size and statistical significance.
Frequently Asked Questions
What does Williams %R measure?
The position of the latest close within the recent high-to-low range, on a scale from 0 to -100.
Is Williams %R the same as the stochastic oscillator?
They are closely related and measure similar information, with different scales.
Is -80 a buy signal?
No. It marks a low position in the range. In a downtrend it can stay low.
What setting should I use?
A 14-period lookback is a common default. Test it rather than assuming it suits your market.
Related Reading
- CCI and Williams Percent Range -- a combined overview
- RSI Indicator Explained -- another oscillator
- Common Indicator Mistakes -- errors to avoid
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