Williams %R
A momentum oscillator measuring where price closes relative to its recent high-low range, with an inverted scale from 0 to -100.
Description
Williams %R was created by Larry Williams and is conceptually similar to the Stochastic Oscillator. It measures where the closing price falls within the highest high and lowest low over a lookback period. The scale runs from 0 to −100 (inverted from most oscillators), where readings near 0 indicate overbought and readings near −100 indicate oversold.
How It Works
%R = (N-period highest high − close) / (N-period highest high − N-period lowest low) × −100. Default period: 14. A reading of 0 means price closed at the top of its range; a reading of −100 means it closed at the bottom. Multiplying by −100 inverts the scale compared to Stochastic, but the interpretation is equivalent.
How to Read It
Readings between 0 and −20 are considered overbought (price near the top of its range). Readings between −80 and −100 are oversold (price near the bottom). Signals include crossovers of the −20 and −80 thresholds — entering when %R crosses back below −20 from overbought (bearish), or above −80 from oversold (bullish). Divergence with price is also a useful signal.
Common Uses
- Identifying overbought/oversold levels in ranging markets
- Crossover signals at the −20 and −80 thresholds
- Combining with trend tools to find pullback entries
- Used extensively in commodity and futures trading
Caveats
Williams %R has all the same weaknesses as the Stochastic Oscillator — it can remain in extreme territory for prolonged periods during trending markets. The inverted scale is a source of confusion for traders used to standard oscillators. It provides little additional edge over Stochastic for most use cases. Directional filtering is essential to avoid shorting into strong uptrends based on overbought %R readings.