Williams Percent Range indicator: what is it?

What is the Williams Percent Range indicator?

The Williams Percent Range, also known as "%R," is a tool that traders use to see if stocks are being bought or sold a lot. It was made by Larry Williams and works a bit like another tool called the Stochastic indicator, but it's simpler and the numbers are flipped around. This tool helps traders figure out when the market might change direction. The %R moves between zero and -100. On its chart, there are special lines at -20 and -80. These lines are like warning signs. If the %R is between -80 and -100, it means a lot of selling is happening. If it's between -20 and 0, it means a lot of buying is happening.

Here's how to calculate it: Take the highest price, subtract the current closing price, then divide that by the difference between the highest price and the lowest price, and finally multiply by -100.

Highest High - Close Price / Highest High - Lowest Low x -100.

Here’s a step-by-step example:

• Imagine you're looking at a stock's chart and you're using the Williams %R to help make your trading decisions. The %R value is currently at -30. This number falls between -20 and 0, which is the area that suggests a lot of buying is happening, or in technical terms, the stock is 'overbought.' This might mean that the stock's price could soon start to go down because it's been bought so much already.
• Now, let's say a few days later, you notice the %R has dropped to -85. This time, it's in the -80 to -100 range, indicating the stock is 'oversold.' A lot of selling has been happening, and this could be a sign that the stock's price might start to rise soon, as selling pressure eases.
• In both cases, you wouldn't make a decision based just on the %R. Instead, you'd look at other signs and tools to confirm what the %R is suggesting. Maybe you'd check if there's been a big news release affecting the stock, or you'd look at the overall market trend. By combining the %R with other information, you can make a more informed decision about when to buy or sell the stock."
• The %R looks at how the closing price of a stock compares to its prices over a certain time, usually 14 days. It can also show longer trends. For example, if you look at 125 days, it can show about six months of trends. If the %R is above -50, it usually means prices are going up. If it's below -50, prices might be going down.