Williams %R

Larry Williams designed it to show how far the close is from the highest high. At 0, close equals highest high. At -100, close equals lowest low. The negative scale simply reflects distance from the top of the range. Once you adjust, it's intuitive: more negative = more oversold.

They're nearly identical in calculation! The main differences: %R is inverted (-100 to 0 vs 0 to 100), and %R is typically displayed as a single line while Stochastic shows %K and %D with crossover signals. Choose %R for simplicity, Stochastic for crossover signals.

Start with standard 14-period. It's balanced for swing trading. As you gain experience, test 10-period (faster, more signals) or 21-period (slower, fewer but more reliable signals). Match period to your intended holding time.

No! %R below -80 is necessary but not sufficient. Wait for the 'hook' - %R turning back up toward -50. Also check for price confirmation and trend context. Buying just because it's oversold leads to catching falling knives.

Primary target: %R reaching -50 (centerline). This means price returned to the middle of its range. Conservative exits at -50 have higher win rates. Aggressive traders target -20 (opposite extreme) for larger but less probable gains.

Compare price swings to %R swings. Bullish divergence: price makes lower low, but %R makes higher low (less negative). Bearish divergence: price makes higher high, but %R makes lower high (more negative). Trade on hook after divergence forms.

Adjust for period and volatility. Shorter periods (10): use -85/-15 since they reach extremes often. Longer periods (21): use -75/-25. High volatility markets: tighter thresholds. Test on your specific instruments.

Taking %R signals in trend direction significantly improves win rate. You're buying pullbacks (oversold in uptrend) rather than fighting trends (oversold in downtrend). Simple filter: only buy oversold %R when price is above 50-day MA.

Yes, especially in strong downtrends. %R can remain below -80 for weeks as price makes new lows. This is why the hook confirmation and trend filter are essential - they help avoid buying in persistent downtrends.

Higher timeframe provides direction - %R above -50 is bullish. Lower timeframe provides entry - extreme %R with hook. Best setup: Weekly bullish (%R > -50) + Daily oversold (%R < -80) with hook = buy pullback in uptrend.

Using fast %R (7-10) and slow %R (21-28) together provides confirmation. Best signal: Both oversold, fast shows hook while slow also below -80. This combines timing (fast) with trend confirmation (slow).

At high IV (common at extremes): Use credit spreads (bull put for oversold) to benefit from IV crush. At low IV: Buy calls/puts or use debit spreads. %R provides direction; IV determines structure. Always check IV rank first.

Test parameter ranges (period 7-28, thresholds -75 to -90). Use walk-forward validation. Look for robust zones where neighboring parameters perform similarly. Separate testing by regime (trending vs ranging). Accept slight suboptimality for robustness.

Limit positions per sector (max 2-3). When scan shows multiple oversold stocks in same sector, choose highest-ranked only. Track average portfolio %R to monitor net exposure. Correlated positions reverse (or fail) together.

In strong trends, price persistently stays near one extreme of the range. %R can remain oversold or overbought as price trends. The range itself shifts with the trend. %R reversals excel in mean-reverting, ranging markets.