Williams %R: What It Shows and Why It Jumps So Much
Williams %R shows where a bar's close sits inside the range of the last N bars. By calculation it is almost the same as stochastic, just in an inverted coordinate system.
The Williams %R indicator: how it is calculated
The formula compares the close with the period's high and low: near the top of the range the reading approaches zero, near the bottom −100. The scale is inverted relative to the usual convention, so overbought sits at the top of the panel and oversold at the bottom. The thresholds are normally taken as −20 and −80.
How many signals it produces on real data
- Rule tested: %R(14) in the overbought or oversold zone
- State changes over the sample: 159 — about 79.3 a year
- Share of bars in the signal state: 38.4%
Measured across 518 daily bars for each of 12 currency pairs. This measures frequency, not profitability: it shows how many decisions the tool demands of a trader. The data is public and the calculation is reproduced by a script in the repository.
How it differs from similar tools
%R differs from stochastic almost only in sign and in having no smoothing second line. It is precisely the absence of smoothing that makes it the jumpiest tool in the set: the measurement gave 79 state changes a year, twice as often as CCI and ten times as often as ADX.
How to apply it
That frequency determines its use. As an entry trigger %R produces too many signals for costs to cover. Its practical value is fast reading of state: a value near zero means the close is pressed to the top of the range, and that is visible instantly. For trades it makes sense to combine it with a trend filter that will cut most of the firings.
Common mistakes
The main mistake is using %R without smoothing and without a filter, reacting to every touch of a zone. At 79 signals a year that guarantees overtrading. The second is confusing %R with stochastic in the settings: identical thresholds on different scales mean different conditions.
This material is for educational purposes and is not individual investment advice.
Frequently asked questions
What does Williams %R show?
The position of the closing price inside the range of the last N bars. Near the upper boundary the reading is close to zero, near the lower one to −100.
Why is the Williams %R scale inverted?
That is how its author designed it: zero at the top, −100 at the bottom. Overbought ends up at the top of the panel, the opposite of the usual oscillator layout.
Why does Williams %R produce so many signals?
Because there is no smoothing. In our measurement the state changed 79 times a year — more often than any other indicator we tested, which makes it unsuitable as a standalone trigger.
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