William %R

William% R is a momentum indicator developed by Larry Williams in 1973 to identify overbought and oversold areas. This indicator is also similar to other momentum indicators, which are more effective when applied in nontrending markets (Sideways).

William% R is quite popular because it was reviewed by the Wall Street Journal, Forbes, Fortune, Technical Analysis of Stocks and Commodities, and many other leading business magazines. Generally use the default setting with a period of 14 days. Sebagal leading indicator, Williams %R is quite reliable in providing the initial signal that precedes the reversal of price movements.

As with other indicators, William% R can also be used for intraday trading using charts minutes, or a more long term with the daily charts, weekly charts to monthly charts. Of course setting period must also be tailored to the characteristics of each stock to smooth the signal, because each share can have different volatility.

Single line at the William% R oscillator is shown on the vertical scale of -100 (minus 100) to 0 (zero). Below the level of -80 and -20 above the level declared as areas of extreme or danger zone. If the line is under level -80 called oversold and if the line is above -20 called overbought.

Williams %R indicates the meaning of the correlation between the closing price at the highest price / lowest price in a given period. Closer to the closing price of the highest prices, Williams% R line will be increasingly close to a 0 (zero) or overbought area on the display oscillators. If the closing price is closer to the lowest price, then the line of William% R will be increasingly under or near the level of -100 (oversold area). If the closing price equal to the lowest or the highest price, then the line of William% R will be at the level of -100 or 0.

It is important to remember again, that the indicator line in the overbought zone does not necessarily give sell signals, as well as when you are in oversold zone. Stock prices are uptrend could continue to rise although the indicator on the oscillator lines showing the condition of being overbought. Likewise, in a strong downtrend, the price could go down even though the pad line indicates oversold oscillators.

Signs are said to be a validation of reading William% R indicator is when there is divergence between the indicator line with the direction of price movement 'when in areas of extreme'. If price movements continue to increase in a market uptrend, but the line indicator is not able to make the new higher peaks such as price movements, it is a sell signal validation. Conversely, if a line indicator which increases as opposed to price movements that leads down (downtrend), then provide the validation signal to buy.

Apart from effective to reduce bad signal if using other indicators as an additional aspect, is also important for traders to pay attention to any 'major trend' in progress. In uptrending charts, try waiting for a chance to buy when the indicator is showing bullish signals. While in downtrending charts, it's better to wait for the signal sell when the indicator to confirm.

We see that William% R is very concerned with the closing price comparison with the highest price / price terndah in a period. This is very similar to the Stochastic. But the line of William% R which consists of one line is called a lack of internal smoothing factor to dampen the bad signals. While the stochastic indicator to apply a double line with the second line as a validation signal to the first line.

Formula Williams %R =

% R = ((Highest Price in n days - Last Closing Price) / (Highest Price in n days - Lowest Price in n days)) x -100
N = period of days used in William's% R