MT4 Oscillator indicator: Williams% R
Williams% R (Wm% R) is a trend and momentum indicator developed by Larry Williams in 1973. This is similar to Stochastic Oscillator but shows the strength of a trend by measuring where the last price closes with respect to the high and low price range for a given period.
If the price approaches the highest level for a given period, then the trend is bullish; If the price approaches the lowest level, then the trend is bearish. However, Wm% R is plotted as a negative percentage that oscillates between 0% and -100% by 0% indicating that the last closing price is in the high range; and -100% indicates that the last closing price is in the low range.
Williams’ R is calculated in two stages. First, subtract the latest price from the high range for that period and divide the difference by the difference between the highest price and the lowest price for the same period span. Multiply the result by -100. The result is a negative percentage. The formula is:
% R = -100 x (Height in the period referred to – last close price) / (highest level in the period referred to – lowest level in the period)
where the range is the specified period. The default period for the range is 14.
William% R gives three different trade signals: divergence; failure swings (failure swings); and overbought and oversold conditions.
For the lines Wm% R -20 and the -80 line represent the overbought and oversold areas respectively. Thus, when Wm% R is above -20, the pair or stock is generally considered overbought and when it is below -80, fundamental security is considered oversold. When Wm% R moves down below the -20 line, this is a signal indicating that the underlying pair price drop is possible and when Wm% R moves up above the -80 line indicates that there is a good potential that the underlying pair price will increase. However, since Wm% R is a leading indicator, this signal may be premature and usually less reliable in a strong trend. In a strong trend, this signal is a warning of impending changes rather than an entry signal. However, some traders prefer -10 and -90 as reference lines for overbought and oversold areas.