A momentum indicator just like the Stochastic Oscillator – the Williams %R aka the Williams was developed by Larry Williams. It moves between 0 to -100 and tells you about overbought and oversold levels. A reading above -20 is overbought and a reading below -80 is oversold. You can find entry and exit points in the market using the Williams %R. It compares a stock’s closing price to the high-low range over a specific period, typically 14 days or periods.

Here’s the Math for the Geeks

It is really not important to remember an equation by heart. However, it is important to understand its underlying components. The Williams %R is calculated based on price, typically over the last 10 or 14 periods.

Williams %R Formula = (Highest High n – Close current period) ÷ (Highest High n – Lowest Low n) x -100

• Record the high and low for each period over 14 periods.
• On the 14th period, note the current price, the highest price, and the lowest price. It is now possible to fill in all the formula variables for Williams %R.
• On the 15th period, note the current price, highest price, and lowest price, but only for the last 14 periods (not the last 15). Compute the new Williams %R value.
• As each period ends compute the new Williams %R, only using the last 14 periods of data.

Note: The n in the formula is the number of periods or candlesticks in the equation.

As you can see above, the indicator is all about the high, close, and low prices. Another way of thinking about the indicator at a high level is that its primary focus is to identify the volatility and momentum of a stock.

What Does Williams %R Tell You?

Okay, we have the basic stuff out of the way. Let’s talk about how to use the WIll%R.

• First of all, the indicator tells you where the current price is relative to the highest high over the last 14 periods or whatever lookback period you’ve chosen. If it’s between -20 and 0, then the stock is overbought or near the high of its recent price range. If it is between -80 to -100, the stock is oversold or far from the high of its recent price range.
• Second, when the price crosses -80 and starts moving above, it could signal an uptrend. On the other hand, if the price crosses -20 and starts moving below, it could signal a possible downtrend.
• Third, you could watch out for momentum failures. For example, during a strong uptrend, the price will reach above -20 now and then. But then if it crosses below -20, and is unable to get back above -20 during the second rise, the uptrend might be in trouble. You should be ready for a possible decline in price. The same applies during a downtrend.