Williams Percent Range strategy is a short-term trading strategy for day traders. Day trading is a dangerous profession because more than 85% of traders fail. But the Williams percent range oscillator can help you skew the balance in your favor. Learn how the Williams %R can help you solidify your trading and buy low and sell high.
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The Williams percent R indicator was developed by legendary guru Larry Williams. Larry is a professional trader, very well-known inside the world trading community.
Larry Williams first revealed the %R indicator in his best seller book “How I Made One Million Dollars Last Year Trading Commodities” written in 1973. However, Larry used the momentum indicator to trade stocks, futures, currencies, and commodities since 1966.
Most notably, Larry is known for winning the World Cup Championship of Future Trading in 1987. This is where he turned $10,000 into over $1.1 million in a 12-month period.
This is a staggering 11,300 return with real money!
Let’s first start by getting into the glossary of financial terms and define what the Williams Percent R indicator is.
What is Williams Percent R Indicator?
The Williams percent R indicator or %R for short is a technical indicator that oscillates between the value 0 and -100. The Williams percent range indicator provides us with valuable information about the strength or weakness of a trend of a stock, commodity, currency pair, cryptocurrency or any other financial instrument that has attached to it a price.
Basically, the Williams percent range indicator is a powerful momentum indicator that can help you day trade any market in the world.
Williams percent range oscillator can be used in various capacities that can help us determine:
- Momentum confirmations.
- Overbought and Oversold readings.
- Strength of the trend.
- Potential buy and sell signals.
If you want to be a proficient day trader using the Forex Williams percent range strategy, you need to understand how this oscillator works. Technical indicators also have some limitations not just strengths. We’re going to expose Williams %R’s strengths and limitations so you can day trade more effectively.
In many ways, Williams percent r is very similar to stochastic indicator, but it has a wider scale of applicability that can work in different types of market environments including sideways and non-trading markets.
The only difference between the two oscillators is how they’re scaled and the math behind each indicator.
The Williams percent range oscillator shows how the current price compares to the highest price over the look back period. By default Williams %R settings are set to 14 periods. On a daily chart that is 14 days, on an hourly chart 14 hours and so on and so forth. Be sure to read the Awesome Oscillator Strategy here.
If you see a zero reading on the Williams percent r indicator, it means the market is trading near or above the highest high during the selected period. Conversely, if you see the Williams %R indicator showing a reading of -100, it means that the market is trading near or below the lowest low during the selected period.
Relying on a systematized set of rules is critical for your success as a day trader.
Below, you have a complete trading system based on Williams percent range indicator.
Williams Percentage Range Strategy
The trading rules for the Williams Percent Range strategy will be outlined in this section.
When day trading, you need to eradicate all the uncertainty around your decision-making process. This is why we have developed the Williams percent range strategy, a rule-based system that will allow you to trade from a place of personal power.
The benefit of our day trading system is that it can be used with any market in the world.
Let’s get started by looking at two out of the box approaches for the forex Williams percent range strategy.
Strategy #1: Day trading Consolidations with Williams %R Indicator
It’s a well-known fact that the markets spend most of their time in consolidation, going nowhere. Thus, having an approach to trade ranges is crucial if you want to survive as a day trader.
Timing a ranging market is not that easy to accomplish. In consolidation, most often the profit margins are very thin. This is why you need to be able to pick up turning points with the precision of a sniper.
Before we even start looking for trade signals, we first need to find a range bound market. Don't forget to read our guide on good forex trading strategies.
See the Forex chart below:
Note: Make sure you use 10 periods for the Williams percent range oscillator.
In his best seller book, "How I Made One Million Dollars Last Year Trading Commodities," Larry states, "as a matter of record, it was designed to help me as it identified the tops and lows of trading range markets with explicit exactness.”
We’re going to put his claims to the ultimate test. In the next step, we’re going to look for real instances in the market and see the %r indicator performs.
After identifying the range-bound market, the next step is to wait for the Williams percent range oscillator to reach extreme readings.
If we’re looking to buy, we want the Williams percent r indicator to show a -100 reading. This not only shows extreme oversold readings, but it also shows that the supply is drying out.
If the momentum indicator gives accurate signals, the market should bounce. Or, at the very least, have an attempt to rally from the oversold readings.
Our entry strategy is quite simple; we buy at the market at the close of the candle that reached -100 reading on the %r indicator.
Additionally, we also want the candle that reached -100 reading to have a bigger trading range than the previous candles. From a technical perspective, this removes any sort of resistance once the market reverses.
For our exit strategy and stop loss management, we simply work with the trading range identified during the first step. In this regard, we place the protective stop loss below the support bottom of the range and take profit at the top resistance of the range.
The beauty of the Williams percent range mt4 indicator is that it’s very versatile and can be used to suit your trading style.
Moving forward, we’re going to outline a second innovative method to effectively exploit the Williams %R indicator.
Strategy #2: Day trading Momentum Burst with Williams %R Indicator
As an alternative to using the Williams percent R to identify overbought and oversold market readings, we have developed a way to catch momentum bursts that you will see on your charts every single day.
Momentum trading can offer you instant gratification, and the Williams %R trading strategy can help you satisfy those financial urges.
Let’s get into how momentum trading works using the Williams %R indicator.
Step #1: Draw a line at the -50 level on the Williams percent R indicator.
The momentum strategy is developed around the -50 level.
For a visual representation, and to better and faster identify the potential trade signals, we add a line at the -50 level. The -50 level is the middle of the Williams percent range oscillator range. When the %R indicator crosses the -50 level, it signals a change in the momentum.
We have also changed the oversold and overbought readings to -90 respectively -10.
Let’s now define what we need to see before pulling the trigger on a trade.
Step #2: Buy once the Oscillator moves from oversold reading and crosses the -50 level
There are two conditions that need to be satisfied before confidently buying.
First, we need to see the %R oscillator in oversold territory. We consider a market oversold if it shows a reading below the -90 level.
Secondly, we need to see the oscillator moving away from oversold territory and cross the -50 level from beneath.
This shift in momentum indicates that we can start looking for trade opportunities in the direction the oscillator crossed the -50 level. In our case, we’re looking to buy right away once the momentum oscillator breaks above the -50 level.
Conclusion – Williams Percent Range Oscillator
In summary, the Williams percentage range oscillator is a great tool that can help you identify the exact low and high in any market. This means that you don’t need to wait for the market turn to develop, but you can get involved in the market right from the beginning of a rally or a selloff.
You can use either of the two Williams percent range strategy presented through this guide but make sure it suits the current market cycle and it suits your own personality.
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