Understanding Williams Percent Range: A Trader's Guide to %R Indicator

If you're looking to sharpen your trading skills, then getting to know the Williams Percent Range (%R) can be a game changer. This technical indicator is a handy tool for spotting whether a market is overbought or oversold, helping you make informed decisions.

Now, %R is quite similar to the Stochastic Oscillator but with a twist – it features an upside-down scale. To keep things straightforward, you'll want to remember to place a minus sign in front of the %R values (think -30% instead of just 30%). Don’t sweat the minus sign when you're analyzing; it’s just part of how this indicator is displayed.

Here's the rundown: when the %R values fall between -80% and -100%, the market is considered oversold. Conversely, if the values hover between -20% and 0%, you’re looking at an overbought market.

But hold your horses! Like any good overbought/oversold indicator, it’s wise to wait for a price reversal before jumping into trades. For instance, if the %R suggests an overbought condition, it’s best to wait for the security’s price to dip before you sell.

One fascinating aspect of the Williams Percent Range is its knack for predicting price reversals. More often than not, the %R will form a peak and start to decline just a few days before the security’s price hits its peak. Similarly, it creates a trough and begins to rise a few days before the price turns up.

How to Calculate %R

The calculation for %R is straightforward and resembles that of the Stochastic Oscillator. Here’s the formula:

%R = (HIGH(i - n) - CLOSE) / (HIGH(i - n) - LOW(i - n)) * 100

Where:

CLOSE — today’s closing price;
HIGH(i-n) — the highest high over the last (n) periods;
LOW(i-n) — the lowest low over the last (n) periods.

For a deep dive into the %R indicator, check out the Technical Analysis: Williams Percent Range.

Understanding Williams Percent Range: A Trader's Guide to %R Indicator

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