Williams %R

Williams %R is a momentum oscillator developed by Larry Williams that ranges from 0 to -100. It measures where the current close falls relative to the highest high over a specified lookback period (typically 14). Readings between 0 and -20 indicate overbought conditions, while -80 to -100 indicate oversold conditions.

How Williams %R Is Used in Trading

Williams %R is closely related to the Stochastic Oscillator but inverted. It responds quickly to price changes, making it popular for short-term trading. When %R reaches the overbought zone and then drops below -20, it generates a sell signal. When it rises above -80 from oversold territory, it generates a buy signal.

A key application is failure swings. If %R reaches overbought territory, pulls back, fails to reach overbought again on the next rally, and then breaks the pullback low, it signals a high-probability reversal. This pattern is more reliable than simple overbought/oversold readings.

Williams %R is especially effective in range-bound markets. Traders combine it with trend indicators like ADX to avoid taking mean-reversion signals during strong trends where the indicator can remain in overbought or oversold territory for extended periods.

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