Developed by Larry Williams, Williams %R is a momentum indicator that works on the lines of a Stochastic Oscillator. Short name popularly known as W%R, this indicator measures oversold and overbought levels of a particular security. It is a comparison of the current price of the security with its highest and lowest prices over a given period of time. The scale ranges from 0 to -100. Readings from 0 to -20 are normally considered overbought, and readings from -80 to -100 are normally

Calculation

% R = [(H x P – close) / ((H x P) – (L x P)) ] x (–100)

H = Highest high over
L= Lowest low over
P = Periods

Technical Analysts prefer to calculate using a 14 period and apply on intraday, daily, weekly or even monthly data.

Usage of indicator

Like other indicators, Williams%R  is also used by technical analysts in conjunction with other technical indicators like MACD. The reason is that an oversold situation does not imply a price reversal in a stock. The prices may continue to drift lower. Same is the case with overbought positions, the stock price may continue to go upwards in an upward trend. Hence Price reversal confirmation should be taken using other indicators as well. The utility of this tool by analysts is to identify the trend of the security and for example in a down trend, traders may look for overbought  readings to establish further short positions and vice-versa.