Williams %R: the stochastic, inverted

What it measures

Williams %R measures how far below the recent high the current close sits, as a percentage of the recent range. A reading of 0 means the close is at the high of the window; −100 means it is at the low.

It is arithmetically the stochastic %K subtracted from 100 and negated, which means the two carry identical information and differ only in presentation.

The inverted scale is not decoration. It puts the strong condition at the top of the panel and the weak one at the bottom in the same visual direction as price, which is why some traders find it easier to read than the stochastic.

How it is calculated

These are the steps Basis performs, verified against the published definition.

1. 1

   Find the highest high and the lowest low over the lookback period.

2. 2

   Take the distance from the highest high down to the current close.

3. 3

   Divide by the full range and multiply by −100.

Settings

Fourteen is the original. The lookback is the only parameter and it controls how long an old extreme keeps influencing the reading; a high that drops out of the window moves the indicator with no new price action, which is worth knowing before reading a sudden shift as a signal.

How to read it

• Above −20 is the strong end of the range and below −80 the weak end. They are not overbought and oversold in any predictive sense.
• In a trend the indicator pins to one end and stays there, exactly as the stochastic does, and counter-trend signals from that state lose money reliably.
• Failure to reach −80 during a pullback in an uptrend is a sign the pullback was shallow — often more useful than any crossing.

Where it misleads

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