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
|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.
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