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The Williams %R, or Williams %Range is a trading oscillator named after its developer - the famous trader Larry Williams. It is good for identifying periods of overbought and oversold in price, allowing traders to take advantage of these anomalies.

Calculation & Formula
%R = (Highest high of last N bars - Close of today) / (Highest high of last N bars - Lowest low of last N bars) * (-100)

 Absolutely NO THINKING is needed, just buy when Blue and sell when Red!

The experienced trader could see that the calculation formula resembles the one of Stochastic K% indicator. The main difference between the two is only the smoothing of the Stochastic which is not done on the Williams R% indicator. The %R scale is from -100 to 0, with readings below -80 considered oversold and above -20 overbought. Cross of these levels are used to signal trade entries.

Trading Methods
There are several trading methods that use the Williams %R Indicator.

Overbought\Oversold method
This trading method resembles the Stochastic trading method. It uses the -20 and -80 levels as oversold and overbought levels, and base trading signals on cross of these levels.

Go Long when Williams %R crosses -80 level from below
Go Short when Williams %R crosses -20 level from above

The 0 and -100 trading levels symbolize areas of Support and Resistance, therefore touch of these levels indicate that price is near Support and Resistance. The cross of -20 and -80 levels indicate that price has touched and bounced from these levels, and it is ready to continue its trend.

Tip: The best trading signals occur when price touches and crosses back the -20 and -80 quickly. This indicates that the Support\Resistance level is indeed strong and that it has an effect over price. If Williams %R stays above -20 or below -80 for several bars - it may have the exact opposite consequences. Long stay at these areas indicate that price did not bounce from the psychological level, but BROKE it.

Zero-Line Cross
It is a strong trend-following trading system, that also incorporates Williams %R as its main indicator. To trade it, start by smoothing the Williams %R with a 14-period Exponential Moving Average. The main signal are generated when the Smoothed Williams crosses the -50 level.

Go Long when Smoothed Williams %R crosses the -50 level from below
Go Short when Smoothed Williams %R crosses the -50 level from above