Williams %R

Larry Williams designed it this way to distinguish it from Stochastic. Think of it as measuring distance FROM the high: 0 = at the high (0% below), -100 = at the low (100% below the high). More negative = closer to the low.

No! In strong downtrends, %R can stay below -80 for weeks. Always wait for: 1) %R to cross back ABOVE -80, 2) Ideally in an uptrend (trend filter), 3) Price confirmation. Never buy on extreme reading alone.

14 periods is standard. Shorter periods (10) give more signals but more false ones. Longer periods (21) give fewer but higher quality signals. Start with 14 and adjust based on backtesting.

They're essentially the same indicator inverted. Williams %R is more sensitive (unsmoothed) while Stochastic is smoother. For swing trading, Stochastic's smoothing may be preferable. Use both for confirmation.

Primary target is -50 (middle of range) or the opposite zone. For a long from -90, target -50 (conservative) or -20 (extended). Exit 50% at -50 and trail the rest.

When price makes a lower low but %R makes a higher low (bullish), or price makes higher high but %R makes lower high (bearish), you have divergence. Wait for %R to cross the threshold (-80 or -20), then enter.

Failure swing: %R reaches extreme (e.g., -95), bounces past -80, returns but fails to reach -95 (e.g., only -88), then rises back above -80. This shows momentum exhaustion and is a high-probability signal (80% WR).

Use 50-day SMA. Only take oversold long signals when price is above SMA (uptrend). Only take overbought short signals when price is below SMA (downtrend). This improves win rate from 58% to 69%.

If standard Williams %R is too choppy for your timeframe, apply a 3-period SMA to smooth it. This reduces whipsaws but adds slight lag. Test both to see which works better for your trading style.

Use weekly %R for major range context, daily for signals, and 4-hour for timing. Ideal setup: all three oversold and turning up. If higher timeframe conflicts, it takes precedence.

A thrust is when %R jumps 40+ points from an extreme in 1-2 days (e.g., -95 to -50). This explosive move shows sudden strong momentum and often signals the start of a significant trend. Trade the thrust day.

Scan daily for %R extremes (< -80 or > -20). Score by: extremity (+2-4), cross confirmed (+2), divergence (+2), failure swing (+3), trend alignment (+1). Rank by score, take top signals. Limit sector exposure.

Failure swings produce the highest reliability at 80% win rate and PF 3.05. Divergence signals are second at 80% WR and PF 2.95. Simple level crosses are lowest at 58% WR. Prioritize failure swings and divergence.

Use three periods: Short (7) for timing, Standard (14) for signals, Long (28) for trend. When all three are oversold and turning up, it's a high-probability setup. This filters out noise from single-period analysis.

Range-bound markets (ADX < 20) produce best results with PF 2.55. Strong trends (ADX > 30) produce PF 0.95 because %R stays extreme. Monitor ADX and reduce Williams %R trading when ADX is high.