Williams Percent Range
What is the % R?
Named after its developer, Larry Williams, the Williams Percentage Range (% R) is a technical indicator that identifies which the assets are overbought and which are oversold. In turn, the distinction helps to identify possible market tipping points.
While it is seen as a single line oscillating on the reverse scale, the % R is entirely different from the Stochastic Oscillator.
How the % R is Applied
The Williams Percentage Range determines possible picture on the chart that demonstrates overbought and oversold conditions. While this is the case, when looking into a trend, the indicator should be considered:
The asset can be overbought should it be located above -20. It may be resold if it goes below -80.
Detached from extreme zones, probable turning points may be suggested by indicators:
Crossing the overbought border above, a sell probability is signalled by the Williams Percentage Range
Crossing the oversold border below, a buy probability is signalled.
While Pattern deviation occurs infrequently, it indicates a possible trend weakness:
* A weak uptrend is determined through the rise in price to a new maximum value while the indicator does not;
* Conversely, a weak downtrend is indicated by a fall in price to the new maximum value while the indicator does not.
Strategy for the Williams Percent Range
The trading strategy is simple:
* One is encouraged to make a buy when the market is oversold (% R reaches -80% or lower);
* Selling is encouraged when the market is overbought (% R reaches -20% or higher).
Divide the difference between the high price and the closing price within a specific time duration by the difference between high and low prices for the same period.
The time span is 14.
R% = – ((H-C) / (H-L)) x 100;
In the formula:
C – last closing price;
L – the lowest price for a certain period;
H – the highest price for a certain period.