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Type of Indicators in Technical Analysis – The William %R

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The William %R indicator was developed by a famous trader and author Larry Williams. This indicator attempts to measure market conditions and prices which are overbought or oversold.

The William %R line always falls between a value of 100 and 0. In a chart where the William %R is shown, there are two horizontal lines that represent 20% and 80% – an indication of overbought and oversold levels.

The William %R is a leading indicator. This means the William %R line either touches the top of 20% or the bottom at 80% before the price moves. At anytime the William %R line crosses the 20% or 80% levels, it is an indicator to either enter into a long or short position.

In the illustration above you can see the market prices in correlation to the William %R line. At anytime the line crosses the 20% top level, it is an indicator to enter into a short position.

On the other hand, at anytime the line crosses the 80% bottom level, it is an indicator to enter into a long position.

The seemingly simple indicator is one of the most used indicators by traders due to it being consistent indicator in forecasting the market price movements.

Other Indicators in Technical Analysis:


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