Williams Percent Range Indicator, %R

 

Williams Percent Range indicator review

Williams Percent Range, %R (fig. 1) is developed by a celebrated trading theorist and expert Larry Williams (not to be confused with Bill Williams) in 1973. The indicator shows the level of oversold/overbought market on the position of the current closing price in the range between the extremes of the previous period.

Williams Percent Range indicator review

Fig. 1

The price level allows to determine the prevalence of buyers, «bulls» or sellers, «bears». The maximum value reflects the strength of the «bulls», the minimal extremum – the strength of «bears», by closing price can be seen, which of the groups of traders prevails in the market (the full truth about Forex).

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Calculating formula

Williams Percent Range shall be calculated by following formula:

%R = -(MAX (HIGH (i — n)) — CLOSE (i)) / (MAX (HIGH (i — n)) — MIN (LOW (i — n))) * 100, where:

  • CLOSE (i) — the current closing price;
  • MAX (HIGH (i — n)) — the maximum for the previous periods (n);
  • MIN (LOW (i — n)) — the minimum for the previous periods (n).

In terminals the standard indicator period for extremes is equal to 14. Williams Percent Range indicator values are placed in the range from 0 to -100. It is believed that B works more accurately on a weak trend and flat and less effectively – with a strong trend. «Williams Percent Range» indicator looks like other similar tools, with no any popular modifications though. It has the greatest resemblance to Stochastic oscillator.

 

Williams Percent Range indicator in MetaTrader 5 platform

Williams Percent Range numbers among the standard indicators in trading terminals. In MT5 platform it can be found in the subtopic «Oscillators» under the «Insertion» tab. It is one of the standard tools. It can be found in the «Insert» section. The standard period of 114 is set in the settings here, it can be changed for any strategy, as well as the percentage values from -20 to -80 are set.

 

Williams Percent Range indicator signals

%R indicator compares the closing price with the last range. If the closing prices are close to the maximum, then the indicator shows the values around zero. If the closing prices are close to the minimum, then the indicator shows the values close to «-100».

Williams Percent Range shows overbought, if the value rises above 20, it indicates that the price is approaching the highs and it can be regarded as a signal to sell. Oversold this Forex indicator shows that when the value is below 80, it indicates that the price is approaching its lows and can be regarded as a signal to buy. The signal for the indicator to exit from oversold or overbought zones is its crossing of the -50 level, which should be confirmed by additional Forex oscillators.

Sometimes it shows divergence, it is a significant signal, so you should pay special attention to it. If the maximum of the price has been updated, and %R shows the maximum less than the previous one, it is a signal to sell. If the indicator shows the minimum more than the previous one and the price updated the minimum, it’s a signal to buy.

The complication of interpreting signals Williams Percent Range is that after entering the overbought/oversold zone it can stay in these zones longer than the price moves along the trend. This results in the fact that it is problematic to work against the trend using %R because of the large number of false signals.

Williams Percent Range signals during the work on the trend or in the flat are more accurate. In particular, it is applicable in Forex trading strategies on the trend, when using large periods of calculation, and as signal levels are used mark -45. But in any case, Williams Percent Range signals will be useful to specify with the help of additional tools.

 

Trading strategies with %R indicator

%R indicator is a fairly simple tool, but its parameters are enough to create a full-fledged Forex strategy. A strategy that uses two B’s at once is considered to be more effective, one of which determines the direction of the trend and the other one shows the input signals.

For instance, some traders use a strategy, in which one of the indicators is set with a period 14, the other – with the period 28 (fig. 2). In case of a longer period, it signals an uptrend if it is above -55. The downtrend is indicated by a mark of less than -45. The signal for a deal opens when %R with the period 14 closes above %R with the period 28.

Williams Percent Range trading strategies for Forex

Fig. 2

Williams Percent Range is used in the strategy with support and resistance lines, which are determined by the latest lows and maximums of the price. The standard period is set to %R at 14. %R should show the exit from overbought, in this case the signal to sell will be the rebound from the resistance line.

Williams Percent Range is often used in simple effective strategies, for instance, with SMA indicator (fig. 3). This strategy is preferably implemented on H1 timeframe. The Moving Average is set up for MA – smoothed method and for the period 25, Williams Percent Range – for the period 200. The task of %R is to determine the exact beginning of the trend or reversal, and MA shows the signals to enter the trade. Signal to buy – %R exits the oversold with the crossing of -80 mark from bottom to top, with the bar closing above MA. Sell signal – exit of %R below MA.

Trading strategies with %R indicator

Fig. 3

Williams Percent Range is used together with the exponential moving average, preferably on the timeframe H4. If the price is lower than EMA and %R is directed downwards, from -20 to -80, it can be a sell signal, if the Percent Range rushes from -100 to -80, it can be a buy signal.

Other strategies may also use Stochastic and Williams PR, along with the resistance and support lines, preferably on the M15 interval. The signal to sell is to touch the resistance level, while %R should show overbought, as well as Stochastic. The strategy with 4 tools (fig. 4), apart from the Williams Percent Range, uses the simple moving average with the period 50, SMA with the period 200 and MACD indicator. The strategy works better at the volatile market.

Williams Percent range in a strategy with two SMA and MACD

Fig. 4

The signal to the trade is the situation when both SMAs are directed upwards, MACD shall be below zero, Williams %R indicator is located at the level of -80 or below it. MACD may be the only tool for the Williams Percent Range. The application option may be MAСD with parameters 24, 36, 14 and the Williams Percent Range with the period 28. The strategy is recommended for implementation on a timeframe from 1H to 4H. Williams %R indicator is the core of this strategy, and its indicators should be validated by MACD. For example, if the Percentage range values are above -20, the transaction is opened in the expectation of price growth, if lower than -80, then the price is expected to decrease.

In one of the most common strategies, except for Williams Percent Range, the RSI and Stochastic indicators are used. RSI is set for the period 21, Stochastic has the parameters 30, 8 and 18. The Williams Percent Range settings are standard. In addition, it is proposed to prepare 3 charts with different timeframes and indicators. It is necessary to confirm the Forex signals of the chart with H4 timeframe, chart signals H1 and M15. If the signals coincide on all charts, then this information about the market is accurate with a high probability. When the uptrend is formed, RSI is placed above the level of 50, Stochastic confirms this information, Williams %R is placed about -80. The downtrend is indicated by the fact that RSI is below the 50 level, Stochastic confirms the advantage of sellers, and Williams %R is placed about -20.

Williams Percent Range is also used for scalping strategies. The indicator is set with standard parameters, in the strategy the Fibonacci levels are used. If the asset price rises and reaches the level from 23.6% to 38.2%, and Williams Percent Range is below the level of -80, it is a signal to buy. Sell deals are opened when the price falls, reaches the Fibonacci level from 23,6% to 38,2% and %R is located above -20, this is a sell signal.

Four tools are applied in the next strategy at once, apart from the Williams Percent Range, it is the Moving Average, Commodity Channel Index CCI Average and the Average True Range ATR are used in the following strategy. MA is set with the period 90, CCI average is set with the period 12, ATR has the period 14, Williams Percent Range – the period 11.

If the price was higher than the Moving Average line, Williams Percent Range below -85 ATR indicator was above the value 0,002, CCI Average – below -100, is a signal to buy. A signal with a reverse value – if the price is lower than the MA line, Williams Percent Range above -15, Average True Range indicator is above 0,002 and Commodity Channel Index – above 100. The strategy is implemented on timeframes up to 5 minutes.

Williams Percent Range is often used in simple strategies, but also in strategies with a large number of tools. For instance, on the hourly timeframe, the system consists of seven indicators: Pivot – to display resistance and support levels, Envelopes – to determine the range of price fluctuations, the indicator SHI SilverTrendSig – to determine the proposed trend reversal points, Stochastic oscillator (with the parameters 14, 8, 13 for the timeframe H1), Money Flow Index (with the period 21) to determine the rate of price change, RSI oscillator and Williams Percent Range (with the period 35).

Buying takes place when the Envlopes touches the support, the blue dot of the SHI SilverTrendSig is visible, Stochastic shows 20 with an intersection from below, RSI crosses the level 30 from below, MFI and %R show the oversold. The sell signal is the factor combination, when Envelopes touches the resistance, the red dot of SHI SilverTrendSig is visible, Stochastic crosses 80 from above, RSI crosses the line 70, MFI and %R show the overbought status.

 

Summary

Williams Percent Range is a simple and popular indicator of the list of tools developed by Larry Williams. One of its main advantages is that it can produce strongly anticipatory signals. This allows it to be used in many strategies. One of the indicator drawbacks is that it reacts very quickly to the slightest price changes, which can lead to a large number of false signals.


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