✔️ Information reviewed and updated in April 2024 by Eduardo López
Indicators like Williams% R are responsible for showing the speed with which the movement of a certain action is being reached, that is, the speed that the price has within the stock market share. This helps us determine if the speed is in an upward or downward trend, so we can see how psychological forces produce the purchase or sale of shares.
Today we will talk about the Williams% R indicator and how some investors often use it to find entry and exit points in their positions. Don't let more time pass and know everything you need to know to operate effectively and efficiently.
➡✨What is the Williams% R indicator?
The Williams% R indicator or also known as the Williams percentage range, is characterized as a momentum indicator And as we mentioned earlier, most investors use it to find entry and exit points for their positions.
Their values usually range from 0 to - 100, where 0 represents an overbought market and - 100 represents an oversold market. Investors generally take a move above -20 to 0 as a signal that the underlying market is overbought, a move below -80 to -100 means the market is oversold.
➡✨ What is the formula to obtain the Williams% R?
Calculating Williams% R is straightforward, we only need the high of the last 14 periods, the low of the last 14 periods and the most recent closing price. The number of periods can be 14 seconds, minutes, hours, days or months, although normally 14 days is the most common.
So the formula would be as follows:
Williams% R =
Maximum (14 periods) - most recent close / Maximum (14 periods) -minimum (14 periods
➡✨ How can you trade using this indicator?
Being considered a bounded oscillator, this means that its values are delimited by a range with very well defined limits, the Williams% R allows for easier identification of overbought and oversold levels. No matter how fast the price increases or decreases in the market, the indicator will always fluctuate within the range 0 and - 100.
Traditionally - 20 is used as the overbought limit and 80 as the oversold limit., these levels can be adjusted to be able to adapt to the different analytical needs of the trader, as well as the characteristics of the market that is being studied.
You should not forget that it is important to bear in mind that the values that indicate an overbought condition are not necessarily bearish, this means that sell positions should not be opened immediately when they are obtained. Markets can become overbought and remain overbought during a long uptrend.
➡✨ Important points to remember
- The Williams% R indicator is within the category of momentum indicators.
- Its values are between 0 and - 100.
- The commonly used time frame is 14 days.
