Williams Percent Range Williams Percent Range Indicator is a part of technical analysis related to oscillators. Designed by Larry Williams in 1973. Williams Percent Range, on the one hand, is not difficult, but on the other hand, it is very effective and useful, showing the rate of price change for trading instruments. It displays on its chart the ratio of the current price to the price range for the previous period.
The Williams Percent Range indicator is a movement indicator that in its essence is very much like the Stochastic Oscillator. The difference between them is that the Stochastic estimates the open and close prices relative to each other, while the Williams Percentage Range uses only one of them and compares it to its range over the period. Williams Percent Range works great when trading in channels, for example. Therefore, when a trader is faced with the task of assessing whether a trading instrument is overbought or oversold, Williams Percent Range is one of the first in the list of assistants in solving this problem.
The author recommends using period 14. In his opinion, this is the most optimal setting for trading. As always, there can be only one recommendation here - listen to the author. Williams Percent Range has a wonderful property - this indicator often shows a possible reversal in advance, that is, it is a leading indicator. So, since this is so, then it is worth using the author's settings, otherwise there is a risk of losing the effectiveness of the indicator.
How the WPR indicator worksWe know that the current price of any trading instrument is the balance of supply and demand at a certain point in time. If we consider not one price (point on the chart), but a price range (several points), then we can say the following - the maximum extreme of the range, this is the point where the strength of buyers (bulls) was at the highest point, and the minimum extreme is the range, this is the point where the strength of sellers (bears) was at its highest point. At the same time, the most significant indicator of the range under consideration is its final price, that is, the closing price. At this point, so to speak, the current balance of forces was finally formed. Here it is shown whether the bulls or bears won in the end and how great or not so great.
So, if the final point of the range is far from the maximum, but the trend is growing, this indicates that the bulls are losing strength and a reversal is possible, that is, you need to sell. And when on a downtrend the bears cannot “break through” their extremum, it means they have lost their strength and a reversal is also possible and it's time to buy. Hence the indicator signals:
- If close is near the maximum extremum, then WPR is in the zero zone;
- If the close is near the minimum extreme, then the WPR is in the -100 zone.
