Williams %R

Williams %R is an overbought and oversold technical indicator that can give easy to interpret buy and sell signals. Williams %R is very similar to the Stochastic Fast indicator (see: Stochastics) as the chart below will illustrate:

Like Stochastics, the Williams %R indicator gives easily interpreted buy and sell signals, as is demonstrated in the chart below of the Nasdaq 100 exchange-traded fund QQQQ:

Williams %R Buy Signal:

When the Williams %R indicator is below the oversold line (20) and it rises to cross over the 20 line, then buy.

Williams %R Sell Signal :

Sell when the Williams %R indicator is above the overbought line (80) and then falls below the 80 line.

In addition to giving clear buy and sell signals, the Williams %R indicator can help identify strong trends; this is discussed on the next page.

Williams %R and Trends :

The Williams % R indicator is extremely useful and profitable during sideways, non-trending markets. However, during trends, the Williams % R indicator does not fare as well, leading to losses. Nevertheless, the Williams % R indicator does give tell tale signs of strong trends that can easily be identified by traders for profit. The following chart of the Nasdaq 100 ETF (QQQQ) illustrates Williams % R's ability to detect such trends:

As the chart of the QQQQ illustrate, when the Williams % R indicator stays in the oversold area (below 20) and any bullish rally barely registers with the Williams %R (i.e. fails to go above 80), then the downtrend is strong and a trader should not go long the market.

Similarly, when the Williams %R indicator stays in the overbought area (above 80) and any attempt at a downturn fails to send the indicator into oversold territory (i.e. fails to go below 20), then the uptrend is strong and a trader should not go short.

The Williams %R is a versatile technical indicator used by many; the indicator gives easily intepreted buy and sell signals, and also informs traders whether or not a market is likely overbought, oversold, or trending strongly. The Stochastic indicator (see: Stochastics) would be a logical next step for investigation.