|→Williams %R is a momentum indicator that identifies overbought and oversold conditions in the market.|
|→Using Williams %R, traders can enter buy positions when the indicator crosses over -80 and sell positions when it crosses under -20.|
|→Williams %R and RSI are similar oscillators but use different ranges and calculation methods to determine overbought and oversold levels.|
What is the Williams R indicator?
Also known as Williams Percent Range, the Williams %R is a momentum indicator that oscillates between 0 and -100. It's used to show when an underlying instrument is overbought or oversold. An asset is said to be overbought when the indicator crosses over the -20 line while it's oversold when it crosses under the -80 line.
In this guide, I'll show you how to set up the Williams R indicator on IQ Option. Next, I'll show you how to use it to trade.
Setting up the Williams R indicator on IQ Option
After logging into your IQ Option account, set up your chart. Here, I'm using the EUR/USD Japanese candles chart.
Click on the indicators feature and select momentum indicators. Next select the Williams percent range.
- Click on the settings feature.
- Next, set the period to 14. The upper line should be adjusted to -80 while the lower line should be -20.
- Click on Apply to save these settings.
The Williams R indicator should appear at the bottom of your chart. The range between the -20 and -80 is purple while the indicator is a blue line.
Basic Williams R indicator strategy
Your objective should be identifying when the indicator crosses the overbought and oversold lines.
When the indicator crosses under the -20 line it's a signal that the bears are taking over and a downtrend is imminent. Open a sell trade. Using the 5-minute candles, you can open a trade that lasts 30 minutes on IQ Option.
When the indicator crosses over the -80, it's an indicator that the bulls are taking over. At this point enter a buy position.
Pros and Cons of Trading with the Williams %R Indicator
- Simple to understand and easy to use for beginners and experienced traders alike.
- Identifies overbought and oversold conditions, providing potential entry and exit points.
- Works well when combined with other technical analysis tools to confirm signals and improve overall trading strategy.
- Can generate false signals in sideways or non-trending markets.
- May not be as effective when used alone, without additional confirmation tools.
- Not suitable for all trading styles, especially for those who prefer long-term investments.
Williams %R vs. RSI: A Comparison
|Williams %R||Relative Strength Index (RSI)|
|Ranges between -100 and 0||Ranges between 0 and 100|
|Overbought when above -20||Overbought when above 70 or 80|
|Oversold when below -80||Oversold when below 30 or 20|
|Developed by Larry Williams||Developed by J. Welles Wilder|
What is the difference between RSI and Williams R?
Oscillators have it that they all look similar on charts. Most have a single line and move in a particular rank. The obvious difference, of course, is how the indicators are calculated. The RSI is calculated in quite a different way to the Williams R indicator. However, we will not compare the mathematical formulas, because it is pointless.
What is worth comparing are the ranges adopted. RSI takes values from 0 to 100, while Williams R moves in the range from -100 to 0. This causes that for both indicators it is different to determine when the market is overbought and when it is oversold.
- RSI is overbought in the reading range of 70 (or 80) to 100 and Williams R shows overbought in the range of -20 to 0.
- RSI is oversold in the reading range of 0 to 30 (20) and Williams R shows oversold in the range of -100 to -80.
As you've seen, the Williams %R indicator is one of the simplest to use on IQ Option.
Now that you know how to set it up, open an IQ Option practice account and try it out.
- Q: How can I minimize false signals when using Williams %R?
- A: Consider combining Williams %R with other technical analysis tools, such as support and resistance levels, trendlines, or moving averages, to confirm signals and reduce the chances of false signals.
- Q: Can I use Williams %R for long-term trading strategies?
- A: While Williams %R is primarily designed for short-term trading, it can be adapted for longer timeframes by adjusting the period length and overbought/oversold thresholds accordingly.
- Q: Is Williams %R suitable for all types of assets?
- A: Yes, Williams %R can be applied to various asset types, including stocks, forex, commodities, and cryptocurrencies. However, the effectiveness may vary depending on market conditions and the specific asset being traded.
- Q: How can I improve the accuracy of Williams %R?
- A: Experiment with different period lengths and overbought/oversold thresholds to find the settings that work best for your trading style and the specific asset you're trading.
- Q: What is the main difference between Williams %R and RSI?
- A: The main difference between Williams %R and RSI is the range and calculation method. Williams %R ranges from -100 to 0, while RSI ranges from 0 to 100. The overbought and oversold levels are also different for each indicator.
GENERAL RISK WARNING
Kindly note that this article does not provide any investment advice. The information presented regarding past events or potential future developments is solely an opinion and cannot be guaranteed as factual, including the provided examples. We caution readers accordingly.
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