What is Larry Williams %R indicator
Williams %R indicator was developed by Larry Williams and it is a momentum indicator. It is usually used to find overbought and oversold levels in non-trending markets. The value of William %R is static 0 to -100. Readings above -20 are considered overbought and readings below -80 are considered oversold.
The usual time period is 14-days for this indicator. Note that when conducting your analysis you shouldn’t pay attention to the minus in the %R value.
Basically, if within that time period the price is near the high end of the price range then the equity is usually considered overbought. And if it is near the low end it usually means it’s oversold. Williams %R is considered to be a leading indicator —meaning that the line of Williams %R gets to the top or bottom before the price does.
Often it is suggested to before making your move, wait until the price actually moves. Williams %R is interesting in the meaning that it almost always forms a peak and turns down a couple of days before the stock’s price peaks and turns down.
Interpretation Larry William’s %R indicator belongs to the oscillators and its value is limited between -100 and 0. Values of %D line that are above -20 indicate that the price is overbought and the values below -80 that it is oversold. But often are using divergence as criteria for buying and selling signals. If price falls to new low, but %R fails to reach new low, downward trend is losing its power and we could expect trend reversal in the near future. Similar goes for upward trend: if %R fails to reach new high when price hits new high, upward trend is losing its power.
Calculation Larry Williams %R indicator
Williams %R = (HIGH(i-n)-CLOSE)/(HIGH(i-n)-LOW(i-n))*100 The indicator takes values in the range: (0, -100), which is a little unusual. That’s why some analysts are adding 100 to the value of the indicator. However, negative values should not confuse you. Simply -100 is the smallest and 0 is the largest value.