Online Trading Concepts


Williams %R and Trends

Williams %R

  1. Williams %R Defined
  2. Williams %R and Determining Trend Strength

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.

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