Williams %R, sometimes called the Williams Percent Range, is a form of momentum indicator that ranges from 0 to -100 and gauges overbought and oversold levels. Finding entry and exit opportunities in the market is possible with the help of the Williams %R indicator. The indicator may be used in a manner that is analogous to that of the stochastic oscillator because of its striking similarities. Larry Williams was the one who came up with the idea, and it evaluates the current price of a stock concerning its high and low prices during a predetermined time, which is often 14 days or longer.

The Formula for the Williams %R Is:

How Should the Williams %R Be Calculated?

Price information determines the Williams %R, often looking back over the previous 14 periods.

Note the top and low scores for each of the 14 time periods.

Take note of the current price and the highest and lowest prices throughout the 14th session. Completing all of the Williams %R formula variables should be easy.

Take note of the current price, as well as the highest and lowest price, but only for the previous 14 periods, for the 15th period (not the last 15). Determine the new value for Williams %R.

Calculate the new Williams %R once each period has ended, but only use the most recent 14 periods of data.

What Information Does Williams %R Provide?

The indicator gives a trader information about where the current price is compared to the maximum high seen in the previous 14 periods (or the number of look-back periods chosen).

When the indicator is between -20 and zero, which indicates that the price is approaching the peak of its previous price range, it is said to be overbought. When the indicator is between -80 and -100, the price is considered oversold or much lower than the high point of its most recent range.

The Williams %R Formula Has Its Limitations.

Even if the indicator shows that conditions are "overbought" or "oversold," this is not guaranteed that a trend will reverse. A strong upswing should routinely see prices pushing to or beyond historical highs, and overbought readings validate an uptrend since this happens more frequently during a substantial advance (what the indicator is calculating).

The indicator may be too sensitive, which means that it may produce an excessive amount of misleading signals. For instance, the indicator may be in the oversold region and begin to climb upward, but the price may not follow suit and continue down. This is because the indicator only considers data from the last 14 periods. Even if the price has not changed much, the relative position of the current price concerning the highs and lows seen in the look-back period will shift with time.

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