Williams’ Percent Range
Williams’ Percent Range is also referred to as %R. This is a momentum indicator and it tells you how the closing price compares to the highest and lowest prices during that period. It can tell traders when an instrument is overbought.
This indicator moves between 0 and -100. If the value is above -20, the market is usually overbought. It’s considered a sign that the market is oversold if the reading is below -80. If the market moves out of the oversold territory, this indicator can be used to determine entry and exit points.
While the typical period that’s used is a 14-day period, you can make adjustments as necessary to match your trading preferences. This indicator can be used to identify exit and entry points by looking at both the value that’s been calculated for the indicator and the direction in which prices are moving.
For example, if the prices are moving up and the indicator moves above -80, it could mean that an uptrend in price is beginning. Traders who like to go short can look for the indicator to start moving below 20. When that downward movement is accompanied by an inability to cross -20 before dropping once more, a larger decline in price could follow.
Calculation of Williams’ Percent Range Indicator
The %R calculation uses the following formula, which is very similar to that of the Stochastic Oscillator:
%R = – (MAX (HIGH (i – n)) – CLOSE (i)) / (MAX (HIGH (i – n)) – MIN (LOW (i – n))) * 100
In this formula,
CLOSE (i) – is today’s closing price;
MAX (HIGH(i-n)) – is the highest maximum over a number (n) of previous periods;
MIN (LOW(i-n)) – is the lowest minimum over a number (n) of previous periods.