In previous posts we have discussed about some important technical
indicators used in stock markets such as fibonacci levels, moving
averages, stochastics and bollinger Bands. In this topic let us try to
learn about 'Williams %R'. Like 'Stochastic Oscillator', Williams %R is
also a momentum indicator used to measure overbought and oversold
conditions in financial markets. It is the inverse of the Fast
Stochastic Oscillator. This method was developed by Larry Richard
Williams, an American author and commodity trader.
'Williams %R' is also called '%R', which shows the current closing price in relation to the high and low of the past N days* (usually 14 days). It is used to know where the financial markets are trading, near the high or near the low, or somewhere in between high and low, of its recent trading range. In other words it is used to calculate the entry and exit points. The values are from '0' (zero) to '-100' (minus hundred). Above '80' it is considered as oversold and below '20' it indicates over bought.
According to the rule a security or financial instrument is considered as a good buy when the following conditions satisfy,
1. '%R' touches -100%
2. Then wait for 5 days after -100% reached
3. When '%R' once again rises above -95% to -85% levels it is a buy.
A security or financial instrument is considered as a good sell if the following conditions satisfy,
1. '%R' touches 0%
2. Wait for 5 days after 0% reached
3. When '%R' once again falls below -5% to -15% levels it is a sell.
'Williams %R' is calculated by using the following formula.
%R = (high of look-back period- current close / high of look-back period - low of look-back period) * -100
A chart showing William's %R levels is given below.
A spreadsheet showing 'Williams %R' levels is given below.
* Instead of days you can use weeks or months to calculate medium term to long term over bought or over sold conditions and buy or sell signals.
'Williams %R' is also called '%R', which shows the current closing price in relation to the high and low of the past N days* (usually 14 days). It is used to know where the financial markets are trading, near the high or near the low, or somewhere in between high and low, of its recent trading range. In other words it is used to calculate the entry and exit points. The values are from '0' (zero) to '-100' (minus hundred). Above '80' it is considered as oversold and below '20' it indicates over bought.
According to the rule a security or financial instrument is considered as a good buy when the following conditions satisfy,
1. '%R' touches -100%
2. Then wait for 5 days after -100% reached
3. When '%R' once again rises above -95% to -85% levels it is a buy.
A security or financial instrument is considered as a good sell if the following conditions satisfy,
1. '%R' touches 0%
2. Wait for 5 days after 0% reached
3. When '%R' once again falls below -5% to -15% levels it is a sell.
'Williams %R' is calculated by using the following formula.
%R = (high of look-back period- current close / high of look-back period - low of look-back period) * -100
A chart showing William's %R levels is given below.
A spreadsheet showing 'Williams %R' levels is given below.
