Williams Percentage R
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Description
Williams %R is a momentum indicator that measures overbought/oversold levels in a non-trending market. It is similar in interpretation to the (CStats) Stochastic Oscillator, differing in that it uses the high price rather than the low price in the numerator.
A bullish signal is generated when 3 conditions are met: the Williams %R has reached 100; five trading days or bars have elapsed and the Williams %R has subsequently fallen to 95. A bearish signal is simply the reverse: the Williams %R has reached 0; five days elapsed and the indicator turned back down.
Williams recommends using a momentum indicator and/or a moving average to establish a market direction, then only trading with the trend. In trending markets, the values will stay at one end of the scale, thus giving false signals to trade against the trend.
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