Williams %R explained

Momentum

What Williams %R measures

Williams %R is a momentum oscillator ranging from 0 to -100 that measures where the current close falls within the high-low range over a lookback period (default 14). It's essentially an inverted version of the Stochastic %K. It identifies overbought/oversold conditions and potential reversals.

How Williams %R readings are interpreted

Values near 0 mean the close is near the period high (overbought). Values near -100 mean the close is near the period low (oversold). Readings above -20 are typically overbought; below -80 are oversold. The indicator oscillates quickly, making it useful for short-term timing but prone to false signals.

Conventional Williams %R levels

-20 to 0: conventionally described as overbought
-80 to -100: conventionally described as oversold
Crossing above -50: bullish momentum shift
Crossing below -50: bearish momentum shift
Failure swing: makes new extreme but price doesn't confirm = divergence signal

Where Williams %R works, and where it does not

Best in ranging markets with clear oscillating price action. In strong uptrends, it stays in overbought territory (above -20) for extended periods — this is a trend-following signal not a sell signal. A 200 EMA filter is the conventional way to contextualise counter-trend reades.

Indicators commonly read alongside Williams %R

RSI: Both showing oversold simultaneously = stronger bounce signal
Stochastic: Williams %R and Stochastic confirming each other reduces false signals
Volume: Look for volume spike when Williams %R hits extreme levels

Known limitations of Williams %R

Very similar to Stochastic — using both adds little value (high correlation)
In fast-moving markets during news events, it whipsaws rapidly
14-period is too long for intraday (1-5 min) — use 5-7 period instead

Williams %R in practice

Williams %R is conventionally used for timing within an existing trend, with oversold dips in an uptrend the commonly cited configuration
The 'failure to reach oversold' pattern: in an uptrend, if %R never reaches -80 before bouncing, trend is very strong
Combine with a 5-period EMA of %R to smooth the signal and reduce whipsaws
Best results on daily chart with 14 period; consider 5 period for 4H chart

Other momentum indicators

ROC — Rate of Change
Momentum (MOM)
TRIX
Ultimate Oscillator

Testing ideas built on Williams %R

A reading of Williams %R can be written as an exact rule and checked against historical data — as a full strategy with entries, exits and costs, or as a single condition and what followed it:

How to backtest a trading strategy without code
Event analysis: what follows a market event

Plot it yourself. Add this indicator to a chart, change every parameter and watch the line move, then backtest how the rule would have behaved on historical data — free on the S&P 500 ETF, no card.

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This is reference material, not advice. It describes what each indicator measures and how its readings are conventionally interpreted. Nothing here is a recommendation to buy or sell anything, and no indicator predicts future prices. GU Analyser is an analytical tool — no money is ever traded here.