PercentR (Indicator)

Developed by Larry Williams, Williams %R is a momentum indicator that works much like the Stochastic. It is especially popular for measuring overbought and oversold levels. The scale ranges from 0 to -100 with readings from 0 to -20 considered overbought, and readings from -80 to -100 considered oversold.

William %R, sometimes referred to as %R, shows the relationship of the close relative to the high-low range over a set period of time. The nearer the close is to the top of the range, the nearer to zero (higher) the indicator will be. The nearer the close is to the bottom of the range, the nearer to -100 (lower) the indicator will be. If the close equals the high of the high-low range, then the indicator will show 0 (the highest reading). If the close equals the low of the high-low range, then the result will be -100 (the lowest reading).

Calculations

%R=100*((Hr-C)/(Hr-Lr))

Where

r = The time period selected

Hr = The highest High of that period

Lr = The lowest Low of that period

C = Today’s Close

The period should be at least five trading days, and half the length of an identifiable market cycle. The more volatile a market, the shorter traders will want to make the period they use for their range. The period will vary with each trader’s market time frame. For a market of average volatility, a good period would be ten days.

The parameter LENGTH can be hard coded with a whole number or can be replaced by a numeric simple input whose default value is a whole number.

Usage

The Percent Range study was first introduced by Larry Williams. It is a commonly used oscillator for choppy markets. Percentage R is most effective in trading markets with defined cycles and in trending markets without a reputation for cycles. Traders should not use %R by itself since it will give false signals in trending markets. It is recommended that trend evaluating studies such as moving averages or Elliot wave be used simultaneously to confirm the signals generated by the %R study.

William’s Percent R differs from most overbought/oversold studies in that the higher the value of the study the more oversold the market and the lower the value of the study the more overbought the market. To be consistent with the other oscillators, AbleSys takes William’s value and subtracts it from one hundred (100). For example, if William’s Percent R returns 80, AbleSys Percent R will return 20.

Reference

Williams, Larry. How I Made One Million Dollars Last Year Trading Commodities. Monterey, California: Conceptual Management, 1973 2nd edition.

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