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Williams %R

Williams %R is an overbought and oversold technical indicator that may offer potential buy and sell signals. Williams %R is very similar to the Stochastic Fast indicator (see: Stochastics) as the chart below will illustrate:

Williams %R and Stochastics are similar technical indicators

Like Stochastics, the Williams %R indicator attempts to give buy and sell signals, as is demonstrated in the chart below of the Nasdaq 100 exchange-traded fund QQQQ:

Williams R buy and sell signal

Williams %R Potential Buy Signal

When the Williams %R indicator is below the oversold line (20) and it rises to cross over the 20 line, then a trader might buy.

Williams %R Potential Sell Signal

A trader might sell when the Williams %R indicator is above the overbought line (80) and then falls below the 80 line.

Furthermore, the Williams %R indicator may help identify strong trends; this is discussed on the next page.

The information above is for informational and entertainment purposes only and does not constitute trading advice or a solicitation to buy or sell any stock, option, future, commodity, or forex product. Past performance is not necessarily an indication of future performance. Trading is inherently risky. OnlineTradingConcepts.com shall not be liable for any special or consequential damages that result from the use of or the inability to use, the materials and information provided by this site. See full disclaimer.

Williams %R and Trends

Since the Williams % R indicator is similar to stochastics, it might be useful during sideways, non-trending markets. However, during trends, the Williams % R probably does not fare as well. Nevertheless, the Williams % R indicator can give tell tale signs of strong trends. The following chart of the Nasdaq 100 ETF (QQQQ) illustrates Williams % R’s ability to detect such trends:

Williams R does not work well during strong trends

As the chart of the QQQQ illustrate, when the Williams % R indicator stays in the oversold area (below 20) and any bullish rally barely registers with the Williams %R (i.e. fails to go above 80), then the downtrend appears to be strong and a trader might avoid any potential buy signals.

Similarly, when the Williams %R indicator stays in the overbought area (above 80) and any attempt at a downturn fails to send the indicator into oversold territory (i.e. fails to go below 20), then the uptrend appears to be strong and a trader might avoid going short.

The Stochastic indicator (see: Stochastics) would be a logical next step for investigation.

The information above is for informational and entertainment purposes only and does not constitute trading advice or a solicitation to buy or sell any stock, option, future, commodity, or forex product. Past performance is not necessarily an indication of future performance. Trading is inherently risky. OnlineTradingConcepts.com shall not be liable for any special or consequential damages that result from the use of or the inability to use, the materials and information provided by this site. See full disclaimer.

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