This
indicator is named after its inventor, Mr. Larry William, based on the same concept as
Stochastic, only in creating a graph, it is inverted, that is, the Scale will climb from 0 down to 100 or there is a small value above it. So the
overbought area means the area above the 20 line and the
oversold area below the 80 line. Instead, it measures the distance between the closing price and the high in N days, but generally 10 days (N = 10, unlike the 5-day
Stochastic indicator ).
William's %R indicator is almost the same as
Stochastic indicator, so some people refer to
William's %R as 10-day
Stochastic. In the case of
William's %R, we use the 80, 20 line instead of the 70, 30 line of the previous oscillator because
William's %R is very sensitive. This makes it easy to fake
signals, thus expanding the range. In fact, William's himself offered it below 95% as a buy
signal. (Don't forget that the values run upside down from 0 to the highest and chase down to the lowest 100) and above 10% is a sell
signal.
In fact, William's does not offer a moving average as a
signal in the same way as
Stochastic, but some analysts use a moving average, but because
William's %R is a
Stochastic, so it runs. Very fast Until sometimes giving an error signal some technical analysts therefore use it only factor with other technical tools only. You can learn more about
William's %R indicator from
S#.Terminal.
For example, using
William's %R to stock prices is shown in the example in the image below where an arrow below or equal to 95 represents a buy or hold moment according to the above principle. Or equal to 10 as in the example, it will be a moment to sell or drain the stock. However, if you observe carefully It can be seen that the adjustment of
William's %R sometimes the share price does not respond much. For example, around number 1, 2, and 3, which is until the stock price drops to the end. Then bounced up,
William's %R hit the -100 line 3 times (it is said that if
William's %R comes in near zero or 100 and there is a drop or rise, the price has a chance to go down or In addition)
William %R can do Divergence with the price as well. This will make the
signal more significant.