Williams %R

Williams %R is a momentum oscillator that measures where a stock's current closing price sits relative to the high and low of its recent trading range, used to gauge overbought and oversold conditions. It was developed by trader Larry Williams and works on a similar principle to the stochastic oscillator, though it is scaled and plotted differently.

The indicator compares the highest high over a set lookback period, typically 14 sessions, to the stock's most recent close, expressing the result on a scale from 0 to negative 100. A reading between 0 and negative 20 is generally considered overbought, showing the stock is closing near the top of its recent range, while a reading between negative 80 and negative 100 is generally considered oversold, showing the stock is closing near the bottom of its recent range. The inverted, negative scale is simply a quirk of how the indicator was originally defined, and it functions the same way conceptually as other bounded oscillators.

The formula is:

Traders use Williams %R much like they use the stochastic oscillator or the relative strength index, watching for extended overbought or oversold readings and for divergence between the indicator and price as a possible early warning of a weakening trend. Because it reacts quickly to recent price swings, it tends to generate signals ahead of slower-moving oscillators, which can be useful for short-term traders but also makes it prone to more false signals during choppy, non-trending markets.