The Williams %R Oscillator: This Is the Indicator You Need

The Williams %R oscillator is an overbought and oversold indicator that oscillates between 0 and -100. It usually anticipates a change in the price direction and vice versa. The Williams is an oscillator and works best in sideways markets than in markets with a strong trend.

williams percent range

Williams oscillator: Technical Indicator

The Williams %R measures how close the price is to the maximum or minimum in a given period of time. The most used period of time is 14 sessions. If the maximum/minimum is close to the maximum/minimum of the last 14 days, it indicates that the price could turn around.

  • Overbought: When the Williams is between 0 and -10, it indicates that the price could turn down.
  • Oversold: When the Williams is between -90 and -100, it indicates that the price could turn up.

It should be noted that the interpretation is inverse to what we are used to in indicators such as the stochastic or the RSI

As we have indicated, the indicator Williams works best in a sideways trend, and therefore the premises of overbought and oversold are met. The formula of the indicator is: %R = (Max – U) / (Max-Min) x 100

  • U: the closing price or the last price of the period.
  • Max the maximum price of the period.
  • Min the minimum price of the period considered.

Interpretation of the Williams %R oscillator

Williams %R

In the graph, we can see two examples of when Williams works and when it does not work.

  • Overbought: If we see the Williams in overbought, it gives us a clear signal of trend change, after a lateral-upward trend. The Williams enters overbought and when it leaves this zone, the quotation turns around to return to the previous lows.
  • Oversold: On the other hand, during the period of oversold, we see that Williams offers several false signals since the quotation is following a downward trend, and it is when the quotation reduces the slope that Williams gives us the definitive buy signal.

It is complex to guess when the price will change the trend, that is why the Williams works better in lateral trends. As most of the indicators, it is recommended to compare with other ones to analyse trends better.

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How is the Williams %R oscillator calculated?

The formula for the Williams %R oscillator is %R = (Max – U) / (Max-Min) x 100, where U represents the closing or last price of the period, Max is the maximum price of the period, and Min is the minimum price of the period.

In what type of market does the Williams %R oscillator work best?

The Williams %R oscillator tends to work best in sideways or range-bound markets rather than in markets with a strong trend. It is designed to identify potential reversals during periods of consolidation.

Are there any limitations to using the Williams %R oscillator?

Yes, the Williams %R oscillator may generate false signals during strong trending markets. It tends to perform better in sideways or range-bound markets where overbought and oversold conditions are more likely to be met.

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