Part 6: Williams %R Oscillator

In 1987, applying his own system, Williams won the World Cup Championship of Futures Trading. He traded 10,000 dollars in real money, and jacks it up to more than 1,147,000 dollars in a period of 12 months of trading. Until now, this feat is still unmatched. Likewise, he also authored a book, How To Prosper in the Coming Good Years.

The book forecasted the best economic and bull market condition in the US for the year and the years to follow, when everyone were predicting a slowdown in the economy. His prediction came true and soon he became one of the most sought after financial author and financial forecaster in the country

How the Williams % R Works

His Williams %R is a technical analysis oscillator that would depict the current ending price to the various high and low of the past several days. This oscillator oscillates on a negative sign starting from negative 100, which is the lowest, to negative 0, which would be the highest. He likewise used a 10 day trading period and values under negative 80 are considered as oversold and those that are over negative 20 are seen as oversold.

Just like the RSI, the Williams %R has a value that is always in a range of either 0 or 100. It has some other technical values on it that would seek to indicate levels of oversold and overbought positions.

Lows and highs indicator is what the William %R formula is about. The formula utilizes values within 100 to 0 to indicate the low and high figures. A valuation of 0% on the charts using Williams's %R would show that indeed the ending or closing price would be the same as the days high.

The most usual case here is that the indicator will hover close to 0% for a period of bullish periods. This usually would indicate that the ending prices are indicative of the period highs. On the other hand, a valuation of -100% would signify that the closing or ending prices would be identical to the days low.

Some Quirks of the Williams %R

Originally, this calculation was based on a 10 day range. The current days trading would then be used to calculate the range whereby it will be used to determine the market range for the period.

The difference with Williams' %R calculations from other tools is that it does not respond to smoothing or the fast and slow lines that you can have in your charts of trade.

This market tool is just like the RSI that would surely work best if your do trending the market since this mechanism is good at showing the divergence of the period high and the present ending price inside the trading range of the known number of periods.

Software systems have a longer period than the originally intended 10 day period. Most software has a 14 day default period for a wider coverage to avoid whipsaw actions natural for shorter duration of indicators. This longer coverage, however, will result in minimal signals.

It Is Still Best To Have Several Indicators

In doing your trade, it is recommended that you just don't use one kind of indicator to work on. Try combining the Williams %R with other types of indicator so that you can have a more dependable basis of information to do your trade. Wait patiently for the hidden price to make its entrance and make its move to whatever direction before you do your trade. This is the best way to do it. Use patience and combine the indicators.