Williams' Percent Range

Williams' Percent Range (%R) is a momentum technical indicator developed by Larry Williams. It is used to measure overbought and oversold levels. Williams' %R is very similar to the Stochastic Oscillator. The difference is that the Stochastic oscillator has internal smoothing and Williams' %R has an inverse scale.

Formula

Williams' %R is calculated as the highest high over a number (N) of previous periods minus the close price of the current period as a ratio and the highest high minus the lowest low over the same number of periods (N) as the denominator, multiplied by -100.

Mathematically:

<math>%R_{i} = \dfrac{MaxHigh(N)-Close_{i}}{MaxHigh(N) - MinLow(N)} \times (-100) </math>

where

<math>\operatorname{Close_{i}}</math> is the close price of the current period;

<math>\operatorname{MaxHigh(N)}</math> is the highest high over a number (N) of previous periods;

<math>\operatorname{MinLow(N)}</math> is the lowest low over a number (N) of previous periods;

Typically, the number of periods (N) for Williams' %R is 14.

Usage

Overbought and Oversold Levels

Williams' %R helps to identify overbought and oversold levels. Williams' %R moves between 0 and -100. Values above -20 are considered to be in overbought territory and indicate that a reversal in price is possible. Values below -80 are considered oversold and also indicate a possible reversal. The value -50 is the centerline for Williams' %R.

Divergences

The divergence between Williams' %R oscillator and price can be used as buy and sells signals.

Go long (buy) on a bullish divergence.

Go short (sell) on a bearish divergence.

See Also

Indicators

• Stochastic Oscillator

Articles

• Williams' %R at Stockcharts