Williams Percent Range, is an oscillator indicator that measures overbought and oversold of the price. It reflects the level of the close relative to the highest high for the look-back period. %R indicator is highly correlated with Stochastic, but in contrast, the Stochastic Oscillator reflects the level of the close relative to the lowest low. As a result, the Fast Stochastic Oscillator and Williams %R produce the exact same lines, the difference is just in the scalling of both indicators.
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%R = (Highest High - Close)/(Highest High - Lowest Low) * -100
Where:
Lowest Low = lowest low for the look-back period
Highest High = highest high for the look-back period
%R is multiplied by -100 correct the inversion and move the decimal.
- Indication of overbought/oversold levels - Traditional settings are -20 as the overbought threshold and -80 as the oversold threshold. When %R value rises above -20 this is a sell signal and when %R value falls below -80 is buy signal.
- Divergence/Convergence - Divergence/Convergence pattern is a form of price action when new high(low) of the price not confirmed with a new high/low of AO. Such price and indicator’s behavior can be interpreted as the weakness of current existing trend.
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