Williams %R

The Williams %R indicator is a technical indicator that relates the current closing price to the high and the low price over the past T trading days. The %R indicator was developed by Larry Williams. This metric can help investors to determine whether a stock or not a stock is overbought or oversold.

In what follows, we discuss the %R definition, look at an example in Excel, and finally discuss an example of how it can be used in combination with buy and sell signals.

Williams %R formula

Let’s start by discussing the Williams %R formula

    $$ \%R = \frac{\textrm{high}_{Ndays} - \textrm{close}_{Ndays}}{\textrm{high}_{Ndays} - \textrm{low}_{Ndays}} \cdot (-100) $$

The Williams indicator range is from -100 up to 0. A value of zero indicates that today’s close was the lowest over the past N days. A value of -100 indicates that today’s close was the highest over the past N days.

Williams %R technical analysis example

Larry Williams suggested a particular trading strategy that should be used in combination with his proposed measure. In particular, he suggested using N = 10 days and considered values below -80 as oversold. Values above -20 were considered to be overbought.

The strategy of Williams is not to trade these signals directly. Instead, buying should be done when:

  • %R equals -100
  • Five trading days passed since -100 was reached
  • %R falls below -95 or -85

Selling a positions should occur when:

  • %R equals 0
  • Five trading days passed since 0 was reached
  • %R rises above -5 or -15

Williams %R example

Let’s have a look at an example using actual stock data. The following Williams %R Excel table illustrates how to implement the formula. The spreadsheet can be downloaded at the bottom of the page.

Williams %R

As can be seen from the example, all we need to implement the %R is historical closing prices for the stock we wish to analyse.

Summary

We discussed the Williams percentage R, a technical indicator that is used to determine whether a position is overbought or oversold. This indicator is widely used by traders and fund managers to determine whether or not a stock is temporarily overbough or oversold.

The above topic is related to the following set of topics:

  1. Technical Analysis
  2. Moving Average
  3. Exponentially Weighted Moving Average
  4. MACD
  5. RSI indicator