Williams %R Indicator

Type of Indicator

Williams %R, also known as Williams Percent Range, is a momentum technical analysis oscillator that measures the level of the closing price relative to the high-low range over a specified period. It helps traders identify overbought and oversold market conditions.

Purpose

The primary purposes of the Williams %R indicator are:

• Identifying overbought (overvalued) and oversold (undervalued) conditions,

• Helping determine potential price reversal points,

• Assessing the strength and momentum of price movements.

Calculation Method

Williams %R is calculated based on the highest high, lowest low, and the closing price over a selected period (typically 14 days). The formula is as follows:

where:

• Highest High is the highest price over the period,

• Lowest Low is the lowest price over the period,

• Close is the closing price.

The result is a value between -100 and 0, where:

• Values from -20 to 0 indicate overbought conditions,

• Values from -80 to -100 indicate oversold conditions.

Trading Based on the Williams %R Indicator

1. Overbought and Oversold Conditions:

   
   

   • If Williams %R is above -20, it indicates overbought conditions. This suggests that the price may be too high and a correction might occur. It is a potential signal to sell.

   • If Williams…