%R Larry Williams

Description

Williams Percent Range, is an oscillator indicator that measures overbought and oversold of the price. It reflects the level of the close relative to the highest high for the look-back period. %R indicator is highly correlated with Stochastic, but in contrast, the Stochastic Oscillator reflects the level of the close relative to the lowest low. As a result, the Fast Stochastic Oscillator and Williams %R produce the exact same lines, the difference is just in the scalling of both indicators.

Formula

%R = (Highest High - Close)/(Highest High - Lowest Low) * -100

Where:

Lowest Low = lowest low for the look-back period

Highest High = highest high for the look-back period

%R is multiplied by -100 correct the inversion and move the decimal.

Most useful cases

• Indication of overbought/oversold levels - Traditional settings are -20 as the overbought threshold and -80 as the oversold threshold. When %R value rises above -20 this is a sell signal and when %R value falls below -80 is buy signal.

• Divergence/Convergence - Divergence/Convergence pattern is a form of price action when new high(low) of the price not confirmed with a new high/low of AO. Such price and indicator’s behavior can be interpreted as the weakness of current existing trend.