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Measures where the current close sits relative to the highest high over the lookback period on an inverted scale, exposing whether price is near the top or bottom of its recent range.
Williams %R measures overbought and oversold levels on a scale from 0 to -100. Readings above -20 suggest overbought conditions, below -80 suggest oversold.
Williams %R, developed by Larry Williams, is a momentum oscillator that measures overbought and oversold levels on a scale from 0 to -100. It's mathematically similar to the Stochastic %K but inverted and plotted differently. Williams %R shows where the current close is relative to the highest high over a lookback period, typically 14 days.
The calculation:
Williams %R = ((Highest High - Current Close) / (Highest High - Lowest Low)) × -100
Example:
14-day High: $55 14-day Low: $45 Current Close: $52 %R = (($55 - $52) / ($55 - $45)) × -100 = -30
Interpreting Williams %R:
- %R = 0 to -20: Overbought; price near 14-day high
- %R = -20 to -50: Bullish zone; momentum positive
- %R = -50: Neutral; price at midpoint of range
- %R = -50 to -80: Bearish zone; momentum negative
- %R = -80 to -100: Oversold; price near 14-day low
Why Williams %R matters:
- Momentum measure: Shows position within recent range
- Extreme readings: Identifies potential reversal zones
- Trend confirmation: Confirms price momentum
- Simplicity: Easy to interpret scale
Trading signals:
- Oversold exit: Buy when %R rises above -80 from oversold
- Overbought exit: Sell when %R falls below -20 from overbought
- Momentum thrust: Strong moves to 0 or -100 indicate momentum
Williams %R vs. Stochastic:
- Same concept: Both measure close vs. range
- Inverted scale: %R uses 0 to -100; Stochastic uses 0 to 100
- No smoothing: %R is unsmoothed; similar to Fast Stochastic %K
Divergence analysis:
- Bullish divergence: Price lower low, %R higher low
- Bearish divergence: Price higher high, %R lower high
Important considerations:
- Trend context: In strong trends, %R can stay extreme for extended periods
- False signals: Extreme readings don't guarantee reversals
- Confirmation needed: Use with other indicators or price patterns
Williams %R provides a straightforward momentum reading. Its unsmoothed nature makes it responsive but potentially noisy, best used with other technical tools for confirmation.