Williams %R

A momentum oscillator that measures the current close's position within the high-low range on a −100 to 0 scale. Mechanically nearly identical to Stochastic %K, but with the sign convention flipped — values near 0 mean overbought, values near −100 mean oversold.

#What it measures

• Position within the range. Same fundamental measurement as Stochastic — where the current close sits relative to the highest high and lowest low over the lookback.
• Sign convention. Williams chose −100 (close at the low) to 0 (close at the high), which inverts visual intuition compared to most oscillators.
• Single-line simplicity. No signal line, no histogram — just one value and its slope.

#Formula

#Inputs in AlgoLift

#Recommended periods

• 5–9 (fast): Short-term scalping. Very sensitive.
• 14 (default): Standard. Good for intraday day-trading.
• 20–28: Smoother readings for swing setups.

#Outputs in AlgoLift

#How to read it

• %R above −20: Close is near the top of the range — overbought.
• %R below −80: Close is near the bottom of the range — oversold.
• %R near −50: Close is at the midpoint of the range — neutral.
• Rising %R: Closes are climbing toward the high of the range.
• Falling %R: Closes are dropping toward the low of the range.

The −20 / −80 thresholds are conventions, not rules. Some traders use −25 / −75 to filter out marginal extremes.

#Best in / worst in

Best in range-bound markets and short-term cyclical instruments. The single-line simplicity makes %R cleaner to read than the two-line Stochastic when you only need the extreme detection.

Worst in sustained trends — same failure mode as Stochastic, since the math is the same. %R can stay above −20 for many bars in a strong uptrend.

#Three setups

#1. Mean-reversion entry in a range

Use %R extremes as direct entry triggers — only valid when you know the market is range-bound.

• Long: %R < −80 AND %R slope > 0 (turning back up).
• Short: %R > −20 AND %R slope < 0 (turning back down).

The slope requirement filters out entries during the initial dive into the extreme.

#2. %R as a pullback timer in a trend

Like the Stochastic setup — let a trend filter set direction, use %R for entry timing.

• Long (uptrend): Price > EMA(50) AND %R was < −75 in the last 3 bars AND %R is now > −60 (rising back through the midline).
• Short (downtrend): Symmetric with %R thresholds flipped.

#3. %R crossover with smoothed %R

Apply a Moving Average Modifier to the %R output to create a signal line. Trade %R crossing its own moving average.

• Long: %R crosses above its 3-bar SMA from the oversold zone.
• Short: %R crosses below its 3-bar SMA from the overbought zone.

This converts the single-line indicator into a Stochastic-like two-line system.

#Advanced patterns in AlgoLift

%R as a regime-aware entry filter. Combine with a KAMA Efficiency Ratio check: only allow %R-based mean-reversion entries when KAMA's ER < 0.3 (market is chopping). When ER > 0.5 (market is trending), the %R extremes lose their reversal meaning — skip the trade.

%R-driven trailing stop. In a long trade, use a Set Exit Condition that closes the position the first time %R drops below −50 (close fell back to the midline). Acts as a momentum-based trailing exit without requiring ATR tuning.

%R for scale-out logic. Wire Set Target Profit with a fractional position size to exit 50% of the position when %R first reaches −20. Let the rest run with a trailing stop. The pattern captures cyclical-style profits without forcing a full exit on every extreme.

#Common mistakes

• Forgetting the sign. Williams %R is bounded between −100 and 0. New users sometimes wire it expecting 0–100 like Stochastic and get inverted signals.
• Treating −20 / −80 as universal. Threshold choice depends on the period. Faster periods produce more extreme readings; you may need −15 / −85 to filter false signals at short periods.
• Using on trending instruments without a trend filter. Same failure mode as Stochastic — selling every overbought reading in an uptrend produces continuous losses.