WILLR (Williams %R)

Williams %R, also known as the Williams Percent Range, is a momentum indicator that measures overbought and oversold levels by comparing the closing price to the high-low range over a specific period. It helps traders identify potential reversal points and market extremes.

Formula

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

Where:
Highest High = Highest high over n periods
Lowest Low = Lowest low over n periods
Close = Current closing price
n = Number of periods (typically 14)

How WILLR Works

Williams %R oscillates between 0 and -100, with readings below -80 considered oversold and above -20 considered overbought. The indicator helps identify potential reversals when price reaches extreme levels, though traders should wait for confirmation before taking positions. Unlike many oscillators, Williams %R is inverted, with lower readings indicating overbought conditions.

Trading Strategies Using WILLR

Strategy Examples

Trade reversals when %R moves out of oversold/overbought zones
Look for bullish divergence in oversold territory
Use %R crossovers of -50 level for trend confirmation
Combine with price action patterns for better accuracy
Monitor multiple timeframe %R readings for stronger signals

Support and Resistance

Historical extreme readings often mark key S/R levels
-50 level acts as dynamic support/resistance
Look for price rejection at extreme %R levels
Use multiple timeframe analysis for stronger S/R zones
Combine with trendlines for better S/R identification

Trend Identification

Readings consistently above -50 indicate uptrend
Readings consistently below -50 suggest downtrend
Higher lows in %R confirm bullish momentum
Lower highs in %R indicate bearish pressure
Range oscillation between -20 and -80 suggests consolidation

Advantages and Limitations

Advantages

Early reversal signals at market extremes
Clear overbought/oversold levels
Works well in ranging markets
Easy to interpret and implement

Limitations

Can give false signals in strong trends
Requires confirmation from other indicators
May stay in extreme zones during trends
Not suitable as standalone trading tool

Best Practices

Using Williams %R Effectively

Wait for price confirmation before trading oversold/overbought signals
Use multiple timeframe analysis for stronger trade setups
Combine with trend analysis tools for better accuracy
Look for divergence between price and %R for potential reversals
Monitor momentum characteristics in different market conditions
Use proper position sizing based on market volatility
Set stops beyond recent swing points
Consider overall market context when interpreting signals
Document which %R settings work best for your trading style
Be patient waiting for high-probability setups
Scale positions based on signal strength
Avoid trading when %R gives mixed signals
Use tighter stops in ranging markets
Look for confluence with support/resistance levels
Regularly review and optimize your %R strategies

Risk Management Guidelines

Maintain consistent position sizing rules
Use wider stops in trending markets
Consider partial profit-taking at extreme readings
Implement trailing stops in strong trends
Reduce exposure during unclear signals
Monitor higher timeframe %R for overall risk assessment
Keep detailed trading records to optimize performance
Always use stop-loss orders to protect capital