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Momentum oscillator comparing close to highest high.
Williams %R is a momentum oscillator developed by Larry Williams that measures the current closing price relative to the highest high over a lookback period (default 14). It ranges from -100 to 0, with readings from -20 to 0 indicating overbought and -80 to -100 indicating oversold.
Key insight: Williams %R is mathematically the inverse of the Fast Stochastic Oscillator, but plotted on a negative scale. The inverted scale can be confusing at first — 0 means the close is at the highest high (overbought), and -100 means it's at the lowest low (oversold).
Despite its simplicity, Williams %R is highly responsive to price changes and often signals reversals before other oscillators. Its sensitivity makes it useful for short-term trading but prone to whipsaws in choppy markets.
Overbought reversal: %R rises above -20, then drops back below -20. This cross back into the normal range signals potential bearish momentum. More reliable when it occurs at price resistance.
Oversold reversal: %R drops below -80, then rises back above -80. This cross back into the normal range signals potential bullish momentum. Most reliable when it occurs at price support.
Divergence: Price makes a new high but %R makes a lower high. Or price makes a new low but %R makes a higher low. Williams %R divergence is quick to appear but should always be confirmed with a price trigger.
This indicator works best when combined with price action analysis. Never trade indicators alone - always confirm with the chart.
Indicators confirm what price action shows. They don't replace it. Never trade based on an indicator signal alone. Always combine with chart structure, pattern recognition, and volume analysis.
The Academy teaches when to use this indicator, when to ignore it, and how to combine it for high-probability setups.
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