Blockchain and Cryptocurrency Advanced - The Williams %R Indicator

The Williams %R which is the short for the Williams Percentage Range Indicator is basically a momentum technical indicator that indicates where the last closing price of a particular cryptocurrency asset is relative to the highest price and lowest price of a particular period of time. The indicator was created by Larry Williams to measure the price momentum in relation to the high price and low price of a given period of time. It is an indicator that is very similar to the stochastic oscillator but operates differently. The Williams %R indicator measures the overbought or oversold price levels in a market.

The Williams %R indicator has proven to be a very powerful and beneficial indicator when it comes to indicating price action momentum. Investors and traders can make use of the Williams %R indicator for reversal signal as well as enty and exit signals, as the different values of the indicator can show if the market is in overbought or oversold and ready for a potential price reversal. Unlike the RSI indicator which shows overbought and oversold and has values moving between 0 and 100, the Williams %R indicator has values that moves between 0 and -100. When the oscillator on the Williams %R indicator has a value above -20 it can indicate that the market is in overbought. When the oscillator on the Williams %R indicator has a value below -80 it can indicate that the market is in oversold. In other words, as the oscillator value moves closer to 0, it is an indication of a strong uptrend movement. In contrast, when the oscillator value moves closer to -100, it is an indication of a strong downtrend movement

Williams %R Calculation

The Williams %R makes use of the highest price, the recent close price and the lowest price in the last “N” period based on the selected timeframe, (the “N” period by default is 14). The formula for calculating the Williams %R is as follows;

Williams %R = (HP – RC) / (HP – LP) x -100

Where;

Highest price = HP
Recent close = RC
Lowest price = LP
(In the last “N” period)
Number of periods = N

Let’s take for instance, using the formula to calculate the Williams %R on the MATIC/USDT chart,
Highest price (HP) = 1.60
Recent close (RC) = 1.35
Lowest price (LP) = 1.07
(In the last 14 periods)

Using the formula (HP – RC) / (HP – LP) x -100
(1.60 – 1.35) / (1.60 – 1.07) x -100
(0.25) / (0.53) x -100
0.4717 x -100 = -47.17
Therefore the Williams %R = -47.17%

From the interpretation of the Williams %R oscillator values which is when the oscillator has a value above -20 it can indicate that the market is in overbought. When the oscillator has a value below -80 it can indicate that the market is in oversold – We can say that the market is neither in the overbought zone or oversold zone.

Best settings on the Williams %R

The Williams %R indicator has a default settings of 14 periods which is considered the best settings for the Williams %R. The number of periods is based on the selected timeframe on the chart. However, it is important to know that when it comes to technical analysis of any cryptocurrency asset, there is no best or perfect settings. The periods can be changed depending on the situation and needs.

Williams %R Indicator on the MATIC/USDT Chart