Williams %R: Another Overbought-Oversold Tool

If the Stochastic and Williams %R look similar, that's because they're cousins — both measure where price closes within its recent range.

Williams %R, developed by Larry Williams in 1966, is a momentum oscillator that measures the current close relative to the highest high over a lookback period. Like the Stochastic, it's bounded — but it reads from −100 to 0, with overbought above −20 and oversold below −80.

The formula

%R = −100 × (Highest High(N) − Close) / (Highest High(N) − Lowest Low(N))

Where N is usually 14.

Worked example:

Value	Number
Current close	$48
Highest high (14)	$52
Lowest low (14)	$44
Range	$8
%R	−100 × (52 − 48) / 8 = −100 × 0.5 = −50

A reading of −50 means the close is exactly mid-range. A reading of −20 means the close is near the top (overbought); −80 means near the bottom (oversold).

The levels

%R	Meaning
0 to −20	Overbought — close near the top of the range
−20 to −80	Neutral
−80 to −100	Oversold — close near the bottom of the range

Many platforms flip the sign and display Williams %R as 0 to 100. The logic is identical — check your chart's legend.

Williams %R vs Stochastic

Feature	Williams %R	Stochastic
Formula	Inverted	Standard
Scale	−100 to 0	0 to 100
Overbought	Above −20	Above 80
Oversold	Below −80	Below 20
Smoothing	None (raw)	Smoothed %K and %D

Mathematically, Williams %R is essentially Stochastic %K − 100. The two are nearly identical — the difference is presentation and the Stochastic's smoothing.

How to trade it

1. Trend filter first — only take oversold signals in an uptrend, overbought in a downtrend
2. Wait for the exit from the extreme — enter when %R crosses back above −80 (long) or below −20 (short)
3. Confirm with price action — a reversal candle at the extreme
4. Watch for divergence — same logic as RSI divergence

The "fast" nature

Williams %R is unsmoothed, so it's noisier than the Stochastic. That means:

• More signals — both real and false
• Faster reactions to short-term swings
• Best paired with a higher-timeframe filter to cut the noise

Worked example strategy

Setup in an uptrend (price above 200 SMA):

1. Price pulls back; %R falls below −80 (oversold)
2. Wait for a bullish candle (hammer, engulfing)
3. %R crosses back above −80 — entry trigger
4. Stop below the swing low
5. Target the prior swing high or a 2:1 RR

Verify the RR with the risk-reward calculator and size with the position size calculator.

Common mistakes

1. Auto-selling at −20 / buying at −80 — strong trends hold extremes
2. No trend filter — the noise will bleed your account
3. Confusing it with the Stochastic — they're similar but not identical
4. Using it as a standalone trigger — always confirm with price action

How to start

1. Add the 14 Williams %R to a daily chart
2. Mark the −20 and −80 levels
3. Add the 200 SMA as the trend filter
4. Only act on extremes that agree with the trend
5. Set stops with the stop loss calculator

Summary

Williams %R is a fast, unsmoothed oscillator that measures where price closes within its recent range — the same idea as the Stochastic, presented upside-down. Use its −20/−80 extremes with a trend filter and price confirmation, and it's a useful complement to slower momentum tools like RSI.