Williams %R

Overview

Developed by Larry Williams, the Williams %R (pronounced "percent R") indicator is a momemtum oscillator used to measure overbought and oversold levels. It's very similar to the Stochastic Oscillator except that the %R is plotted upside-down on a negative scale from 0 to -100 and has no internal smoothing. The %R defines the relationship of the close price relative to the High-Low range over n-Periods. The nearer the close price is to the highest high of the range the nearer to zero the reading will be. Alternatively, the nearer the close price is to the lowest low of the range the nearer to -100 the reading will be. If the close price equals the highest high of the range the reading will be 0; if the close price equals the lowest low of the range to reading will be -100.

Interpretation

As an overbought/oversold indicator, Williams %R values from 0 to -20 are considered overbought while values from -80 to -100 are considered oversold. An interesting phenomena of the %R indicator is its uncanny ability to anticipate a reversal in the underlying trading instrument's price.

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