What is Williams %R?

Williams %R is a momentum oscillator that doesn’t pretend to be something it’s not. It tells you where price is within its recent range—nothing more, nothing less. Invented by Larry Williams, it’s a simple yet sharp tool to measure market extremes.

It moves between 0 and -100. Anything above -20? That’s traditionally overbought. Below -80? Oversold. But here’s the catch: overbought doesn’t mean reversal. Sometimes it means strength. And that’s what makes %R useful—it’s not just about signals. It’s about reading intent.

The Math (So You Don’t Miss the Point)

The formula is straightforward:

%R = (Highest High – Current Close) / (Highest High – Lowest Low) × -100

• Highest High: Over your chosen lookback (commonly 14 periods)
• Lowest Low: Same lookback
• Current Close: You guessed it

Why the -100 multiplier? It flips the output to give us a consistent range between 0 and -100. Unlike the Fast Stochastic, which gives you 0 to 100, Williams %R is inverted—but otherwise, they’re twins.

How Traders Actually Use It

1. Overbought and Oversold Aren’t What You Think

• Above -20 = Overbought
  Doesn’t mean sell. Could mean trend is strong.
• Below -80 = Oversold
  Doesn’t mean buy. Could mean selling pressure is heavy and real.

If you’re expecting a reversal every time %R hits extreme levels, you’re going to be wrong more often than you’d like. Better to think of these zones as context, not calls.

2. Momentum Failures Are the Real Tells

This is where things get interesting. Suppose %R breaks into overbought territory (above -20), then pulls back, and tries to return—but fails. That failure to reclaim the overbought zone hints at weakening upside momentum.

Same logic applies to the downside:

• Drops below -80 (oversold)
• Bounces
• Can’t get back below -80?

That’s a sign. Momentum is shifting. And this setup often precedes trend exhaustion.

3. Midpoint Crosses Help Define Bias

The 50 line is more than just the halfway mark:

• Cross above -50? Price is now in the upper half of its recent range. Bullish.
• Cross below -50? Price is sinking. Bearish.

This is subtle but powerful when you’re watching trend transitions.

Settings and Customization

Default Lookback: 14 Periods

It’s the vanilla flavor—fine for most. But:

• For fast-moving names? Try 9
• For longer setups? Try 21

Adjusting Levels

• Aggressive traders might tighten overbought/oversold zones to -10/-90
• Range traders may prefer -30/-70 for more signals
• Use historical context. Don’t set it and forget it.

Why It Works (When It Works)

%R works because it’s responsive. It reacts fast to price movement, which gives you an edge in short-term momentum plays. Compared to RSI or MACD, it’s less laggy and more twitchy—great for quick reads in high-volatility environments.

It’s also visually intuitive. If %R is hugging the top of its range, buyers are in control. Bottom? Sellers. No interpretation gymnastics required.

%R vs. Stochastic: The Friendly Rivalry

• Same math, different spin
  Stochastic uses the lowest low in its formula. %R uses the highest high. Result? Same shape, different scaling.
• Same signal lines, different sentiment
  Stochastic feels smoother, slower. %R is snappier. Like RSI vs. RSI(2)—one’s a newspaper, the other’s a tweet.

If you’re already using Stochastics and like it, %R won’t offer new signals—but it might offer a faster read.

Use It… But Don’t Use It Alone

%R is a one-trick pony, but it does the trick well. Still, it’s not gospel. Use it with:

• Volume (to confirm strength behind the move)
• Support/Resistance (to avoid chasing)
• Trend filters like moving averages

Example: If price breaks resistance and %R is > -20, you’re in strong territory. But if you’re below a 50-day MA, maybe pump the brakes.

Recap

Williams %R is:

• A momentum oscillator
• Best for spotting potential exhaustion or continuation
• Not a crystal ball—but a solid compass

When it reaches extremes, you don’t assume reversal. You watch what happens next. That’s where the edge lives.