Williams %R

Overview

Williams %R, created by Larry Williams in 1973, is a momentum oscillator that closely resembles the Stochastic Oscillator but inverted. It measures the level of the close relative to the highest high of the look-back period, ranging from 0 to −100 (note the negative scale).

Formula

%R = -100 × (HighestHigh - Close) / (HighestHigh - LowestLow)

Default period = 14

Default Settings

• Period: 14
• Overbought: −20 (close near recent high)
• Oversold: −80 (close near recent low)

How to Use It

1. Overbought / Oversold

• %R between 0 and −20 — overbought, watch for short opportunities
• %R between −80 and −100 — oversold, watch for long opportunities

2. Failed Reversal

One of Williams’ specific insights: if %R reaches overbought but then fails to return to oversold (or vice versa) within 4–5 bars, it’s a strong signal that the trend will continue in the previous direction. Sometimes called “failure swing”.

3. Midline (−50)

Crosses above / below −50 indicate momentum shifts. Less common signal but cleaner than threshold-based ones.

4. Divergence

Standard rules: price makes new high but %R doesn’t = bearish divergence.

Strengths

• Very sensitive — signals come early
• Simple computation, fast to read
• The “failure swing” pattern is unique and effective in trends

Weaknesses & Common Mistakes

• Many false signals in trends — same issue as Stochastic; embeds in extreme zones
• Negative scale confuses some readers — 0 is overbought, −100 is oversold (counter-intuitive)
• Whipsaws around thresholds — %R oscillates rapidly when price chops

Best Combinations

• Williams %R + Moving Average — trade reversals only in MA-confirmed direction
• Williams %R + Bollinger Bands — oversold %R + lower Bollinger touch = strong long candidate
• Williams %R + RSI — both oversold simultaneously is high-confidence reversal

Practical Example

Crude Oil 1H chart in a range. Williams %R dips to −90 (oversold) at lower bound of range. Price forms bullish engulfing candle. Long entry, stop below the engulfing low, target top of range. %R-led range trades have decent win rate when the range is well-defined.

Bottom Line

Williams %R is essentially an inverted, slightly more sensitive Stochastic. Use the same rules: it works in ranges, fights trends — respect the regime.