Williams %R
Technical IndicatorsA momentum oscillator that measures overbought and oversold levels on a scale of 0 to -100. Readings above -20 indicate overbought conditions and below -80 indicate oversold conditions. It is essentially an inverted stochastic oscillator.
What Is Williams %R?
Williams %R, developed by Larry Williams, shows where the current close sits relative to the highest high over a lookback period (default 14). The formula produces values between 0 and -100. A reading of -10 means the close is near the top of the recent range (potentially overbought). A reading of -90 means it is near the bottom (potentially oversold). Despite the negative scale, the interpretation mirrors the Stochastic Oscillator but inverted.
Trading Signals
When Williams %R crosses above -80 from below, it signals that the pair is leaving oversold territory, a potential buy signal. When it crosses below -20 from above, it signals the end of overbought conditions, a potential sell signal. On GBP/USD, these signals work well on the 4-hour chart for swing trades, especially when confirmed by support/resistance levels or Pivot Points.
Best Practices
Williams %R works best in ranging markets for identifying reversal points. In trending markets, use it only for entries in the direction of the trend: in an uptrend, buy when %R dips to oversold and turns up; in a downtrend, sell when %R reaches overbought and turns down. The 14-period default is standard, but 10 periods provides slightly faster signals for day trading. Since Williams %R and the Stochastic Oscillator are so similar, there is no need to use both. Choose one and combine it with a trend indicator like MACD (Moving Average Convergence Divergence) or a Moving Average.
Related Terms
Stochastic Oscillator
A momentum indicator that compares a currency pair's closing price to its price range over a set number of periods. It generates %K and %D lines that oscillate between 0 and 100, with readings above 80 considered overbought and below 20 oversold.
RSI (Relative Strength Index)
A momentum oscillator that measures the speed and magnitude of recent price changes on a scale of 0 to 100. Readings above 70 suggest overbought conditions; below 30 suggest oversold conditions.