- Type of Indicator: Momentum Oscillator
- Creator: Larry Williams
- When Created: 1960s
- First Mentioned In: How I Made One Million Dollars Trading Commodities Last Year
What Is The Williams %R (Percent Range)?
The Williams %R, also known as the Williams Percent Range, is a momentum-based technical analysis indicator developed by Larry Williams.
It is used to identify overbought and oversold conditions and potential trend reversals. The Williams %R is calculated using the highest high and lowest low of an asset over a specific period.
The tool oscillates between 0 and -100, with readings above -20 indicating overbought conditions and readings below -80 indicating oversold conditions.
Traders can also look for bullish and bearish divergences between the indicator and the cryptocurrency’s price to identify potential trading signals.
How Do You Read The Williams %R?
The Williams %R provides traders with information about potential overbought and oversold conditions.
Readings above -20 indicate that the asset may be overbought and due for a potential price reversal, while readings below -80 indicate that the asset may be oversold and due for a potential price reversal.
Traders also look for bullish and bearish divergences between the tool and the cryptocurrency’s price to identify potential trading signals.
A bullish divergence occurs when the price makes a lower low, but the indicator makes a higher low, while a bearish divergence occurs when the price makes a higher high, but the indicator makes a lower high.
How Does The Williams Percent Range Work?
The Williams %R works by calculating the highest high and lowest low of a asset over a specific period and measuring where the current price is relative to that range.
This calculation is designed to filter out short-term price fluctuations and highlight the underlying trend.
How Is The Williams %R Calculated?
Williams %R = (Highest High – Close) / (Highest High – Lowest Low) * -100
How Do You Use The Williams Percent Range?
Overbought/Oversold Conditions: Readings above -20 indicate that the asset may be overbought and due for a potential price reversal, while readings below -80 indicate that the asset may be oversold and due for a potential price reversal.
Bullish/Bearish Divergences: A bullish divergence occurs when the price makes a lower low, but the indicator makes a higher low, suggesting a potential price reversal. A bearish divergence occurs when the price makes a higher high, but the indicator makes a lower high, suggesting a potential price reversal.
Additional Trading And Risk Management Tips
Combine the Williams %R with other technical indicators or chart patterns to improve the accuracy of your trading signals and create a more comprehensive trading strategy.
Adjust the lookback period for calculating the Williams %R to suit your specific trading style and the market you are analyzing. Shorter lookback periods will make the indicator more sensitive to price changes, while longer lookback periods will make it less sensitive.
Test the Williams %R on historical data to evaluate its effectiveness for your specific trading style and market conditions before incorporating it into your live trading strategy. Consider using a TradingView account to backtest the tool on different assets and timeframes.
Practice proper risk management techniques to protect your investments, and always consider other factors in addition to the Williams %R when making trading decisions.
Consider using the technical analysis tool to identify potential support and resistance levels or trendlines, which may help confirm potential entry and exit points or to identify areas of confluence.
Be aware that the indicator may perform differently in different market conditions, so it’s essential to stay flexible and adapt your trading strategy as needed.
Keep in mind that the Williams %R is a lagging indicator, which means it reflects past price movements and may not accurately predict future price movements.
Consider using the tool to identify potential breakouts or trend reversals, particularly when combined with other technical indicators or chart patterns.