As with the Stochastic Oscillator, Williams %R reflects the level of the close relative to the high-low range over a given period of time. Assume that the highest high equals 110, the lowest low equals 100 and the close equals 108. The high-low range is 10 (110 - 100), which is the denominator in the %R formula. The highest high less the close equals 2 (110 - 108), which is the numerator 0.2 divided by 10 equals 0.20. Multiply this number by -100 to get -20 for %R. If the close was 103, Williams %R would be -70 (((110-103)/10) x -100).
The centerline, -50, is an important level to watch. Williams %R moves between 0 and -100, which makes -50 the midpoint. Think of it as the 50 yard line in football. The offense has a higher chance of scoring when it crosses the 50 yard line. The defense has an edge as long as it prevents the offense from crossing the 50 yard line. A Williams %R cross above -50 signals that prices are trading in the upper half of their high-low range for the given look-back period. This suggests that the cup is half full. Conversely, a cross below -50 means prices are trading in the bottom half of the given look-back period. This suggests that the cup is half empty.
Low readings (below -80) indicate that price is near its low for the given time period. High readings (above -20) indicate that price is near its high for the given time period. The IBM example above shows three 14-day ranges (yellow areas) with the closing price at the end of the period (red dotted) line. Williams %R equals -9 when the close was at the top of the range. The Williams %R equals -87 when the close was near the bottom of the range. The close equals -43 when the close was in the middle of the range.
The centerline, -50, is an important level to watch. Williams %R moves between 0 and -100, which makes -50 the midpoint. Think of it as the 50 yard line in football. The offense has a higher chance of scoring when it crosses the 50 yard line. The defense has an edge as long as it prevents the offense from crossing the 50 yard line. A Williams %R cross above -50 signals that prices are trading in the upper half of their high-low range for the given look-back period. This suggests that the cup is half full. Conversely, a cross below -50 means prices are trading in the bottom half of the given look-back period. This suggests that the cup is half empty.
Low readings (below -80) indicate that price is near its low for the given time period. High readings (above -20) indicate that price is near its high for the given time period. The IBM example above shows three 14-day ranges (yellow areas) with the closing price at the end of the period (red dotted) line. Williams %R equals -9 when the close was at the top of the range. The Williams %R equals -87 when the close was near the bottom of the range. The close equals -43 when the close was in the middle of the range.