Understanding Williams Percentage Range Indicator

Hello everyone, hope you all are doing good? This is the beginning of an exciting two part series, which promises to be informative and also educative, do well to follow all the parts, as you will definitely gain 1 or 2 useful information from the series. In today's article we would be looking at knowing what Williams Percentage Range(WPR) Indicator and how do we interpret overbought and oversold signals with The Williams %R when trading cryptocurrencies?

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Source

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Williams Percentage Range Indicator is also known as Williams %R indicator or WPR indicator, as it was named after Larry Williams in 1973, who invented this great technical indicator.

WPR indicator is an oscillator-based indicator, as it shows when a market is overbought or oversold, which will enable traders know if the market is a bullish or bearish market, and also, if there might be any trend reversal.

The WPR indicator is a pretty good indicator, as traders will be able to set up a good buy or sell entry position from the signals from the indicator.

As an oscillator-based indicator, the WPR indicator ranges between 0% to -100%. If the WPR line falls between 0% to -20%, it indicates that the market is overbought by the traders, which might indicate a Bearish trend reversal as there will definitely be a market correction soon enough. If the WPR line falls between -80% to 100%, it indicates that the market is oversold by traders, which might indicate a bullish trend reversal, as there will definitely be a market correction soon enough.

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WPR indicator Calculation

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WPR indicator formula = (PMax - PC) / (PMax - PMin) × -100

Where;

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PMax = Highest price value of "n" periods

PC = Closing Price

PMin = Lowest price value of "n" periods

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Illustration

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The maximum and minimum price from the last 14 days are $200 and $120 respectively. The closing price for the day is $140.

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PMax = $200

PC = $140

PMin = $120

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WPR = (200-140)/(200-120) x -100

WPR = (60)/(80) x -100

WPR = 0.75 x -100

WPR = -75%

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WPR is -75%, it indicates that traders are selling the asset, hence, a bearish market trend.

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The Best WPR Indicator Settings

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The best WPR indicator settings is subjective as different type of traders have different trading strategies. You can't expect short term and long term traders using the same indicator settings.

But for me, I think the best WPR indicator settings is the default settings, because Larry Williams(WPR inventor) sees it as the best. The default setting is 14 periods.

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Overbought Signals With WPR Indicator

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You can easily spot and interpret when an asset is overbought using the WPR indicator. Whenever the WPR line is between 0% to -20%, it indicates that the asset is been overbought.

As a trader, you should be expecting a bearish trend reversal, because whenever an asset is overbought, there is always a market correction nearby. Look at the image below for more understanding

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Oversold Signals With WPR Indicator

You can also easily spot and interpret when an asset is oversold using the WPR indicator. Whenever the WPR line is between -80% to -100%, it indicates that the asset is been oversold.

As a trader, you should be expecting a bullish trend reversal, because whenever an asset is oversold, there is always a market correction nearby. Look at the image below for more understanding.

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Although, there are still some exceptions, as the price might still keep on pumping(Overbought ~ 0% to -20% signal) or dumping(Oversold ~ -80% to -100% s) when the trend strength is strong. As a trader you should always make use of other indicators to confirm your trade set up before entering any trade.

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Thanks For Reading