Williams %R

Williams %R is a momentum oscillator that measures where the current price sits relative to the highest high over a lookback period, displayed as a negative-scaled indicator in a lower panel ranging from 0 to -100. Created by Larry Williams, this indicator is essentially an inverse, faster-reacting version of the Stochastic oscillator, making it particularly effective for spotting short-term reversals. For option traders, Williams %R excels at identifying precise moments when stocks reach extreme overbought or oversold conditions, providing excellent timing for selling weekly options. Its sensitivity to price extremes and quick reversal signals make it a favorite among traders seeking to capitalize on short-term exhaustion points.

How Williams %R Works

Williams %R shows price position in recent range:

The Calculation

%R = (Highest High – Current Close) / (Highest High – Lowest Low) × -100

  • Measures from top of range (inverse of Stochastic)
  • 14-period default lookback
  • Negative scale (0 to -100)
  • More intuitive: -100 = bottom, 0 = top

Reading Williams %R Values

  • 0 to -20: Overbought zone
  • -20 to -80: Normal trading range
  • -80 to -100: Oversold zone
  • -50: Middle of recent range

The negative scale takes adjustment but becomes natural.

Williams %R vs Stochastic

Understanding the relationship:

Key Differences

Williams %R:

  • Measures from high
  • Single line (no smoothing)
  • Faster signals
  • More whipsaws

Stochastic:

  • Measures from low
  • Two lines (%K and %D)
  • Smoothed signals
  • Fewer false signals

Williams %R = Fast Stochastic %K inverted.

When to Use Each

Williams %R: Short-term trades, weekly options Stochastic: Longer-term positions, confirmation

Williams %R Settings

Standard settings and variations:

Period Selection

  • 14 periods: Larry Williams’ default
  • 10 periods: Even faster signals
  • 21 periods: Smoother, fewer whipsaws
  • 5 periods: Ultra-short scalping

Shorter = more sensitive but more false signals.

Overbought/Oversold Levels

  • Traditional: -20/-80
  • Conservative: -10/-90
  • Aggressive: -30/-70
  • Trending adjustment: -20/-60 (bull), -40/-80 (bear)

Williams %R Signals

Key signals from this lower indicator:

Basic Reversal Setups

Oversold Bounce (Put Selling):

  1. %R drops below -80
  2. Extreme oversold reached
  3. %R hooks up above -80
  4. Sell puts at support

Overbought Reversal (Call Selling):

  1. %R rises above -20
  2. Extreme overbought reached
  3. %R drops below -20
  4. Sell calls at resistance

Wait for the hook – don’t anticipate.

Edge Zone Trading

Below -95: Extremely oversold

  • Rare occurrence
  • Snap-back likely
  • Size up put sales
  • Use tight stops

Above -5: Extremely overbought

  • Equally rare
  • Reversal imminent
  • Size up call sales
  • Quick profits expected

Williams %R Patterns

Powerful patterns in this lower indicator:

Double Bottom/Top

%R Double Bottom (Bullish):

  1. First drop below -80
  2. Rally to -50 area
  3. Second drop below -80 (higher low)
  4. Strong reversal signal

%R Double Top (Bearish):

  1. First rise above -20
  2. Pullback to -50 area
  3. Second rise above -20 (lower high)
  4. Strong reversal signal

Failure Swings

Bullish Failure Swing:

  • %R below -80 (oversold)
  • Rallies but fails to reach -20
  • Drops but stays above -80
  • Bullish – sell puts

Bearish Failure Swing:

  • %R above -20 (overbought)
  • Drops but fails to reach -80
  • Rallies but stays below -20
  • Bearish – sell calls

Williams %R Divergences

Less common but powerful:

Hidden Divergences

Bullish Hidden Divergence:

  • Price higher low
  • %R lower low
  • Trend continuation up
  • Keep selling puts

Bearish Hidden Divergence:

  • Price lower high
  • %R higher high
  • Trend continuation down
  • Keep selling calls

Regular divergences exist but less reliable than with RSI.

Williams %R for Weekly Options

Optimizing for short-term trades:

Weekly Option Settings

  • 10-period %R on hourly charts
  • -15/-85 levels for earlier signals
  • Combine with daily %R
  • Quick 3-5 day trades

Fast Scalping Setup

  • 5-period %R on 15-minute
  • -10/-90 extreme levels
  • 0-1 DTE options only
  • Multiple round trips

Friday Expiration Trading

Thursday screening:

  1. Find stocks with %R < -85
  2. Confirm support nearby
  3. Sell Friday expiration puts
  4. Capture overnight bounce

Combining Williams %R

This lower indicator works best with others:

%R + RSI Combo

Power Setup:

  • Williams %R oversold (< -80)
  • RSI oversold (< 30)
  • %R turns first (faster)
  • RSI confirms (reliable)

%R + Moving Averages

Trend Context:

  • Above 50 MA + %R oversold = Buy signal
  • Below 50 MA + %R overbought = Sell signal
  • Trade with trend using extremes
  • Avoid counter-trend trades

%R + Volume

Confirmation:

  • %R extreme + Volume spike = Exhaustion
  • %R extreme + Low volume = Weak conviction
  • Best setups have volume confirmation
  • Size accordingly

Common Williams %R Mistakes

Too Fast Settings: 5-period whipsaws constantly Ignoring Trend: Oversold in downtrend stays oversold No Confirmation: Trading %R alone Early Entry: Not waiting for hook

Building a Williams %R System

Systematic approach:

Daily Scan Process

  1. Scan for %R < -90 (extreme oversold)
  2. Verify uptrend intact (above 200 MA)
  3. Check for nearby support
  4. Wait for %R to hook above -80
  5. Sell weekly puts below support

Position Management

  • Exit if %R reaches opposite extreme
  • Take profits at 50%
  • Stop if breaks support with %R < -80
  • Trail stops using %R levels

Performance Tracking

  • Win rate by %R level
  • Average days in trade
  • Optimal holding period
  • Best %R settings by stock

Williams %R Advantages

Why traders love this lower indicator:

Speed: Fastest reversal signals Clarity: Clear extreme levels Simplicity: Single line, easy to read Effectiveness: Great for short-term trades

Williams %R Limitations

Understanding weaknesses:

Whipsaws: Too many signals in ranges No Smoothing: Can be erratic Short-term Focus: Less reliable for position trades Trend Blind: Stays extreme in strong trends

Best used for timing, not trend determination.

Key Takeaways

Williams %R:

  • Lower indicator showing price position in range
  • Negative scale from 0 to -100
  • Above -20 = overbought
  • Below -80 = oversold
  • Fastest reversal indicator
  • Perfect for weekly options
  • Best with confirmation

Williams %R is the option seller’s speed demon, providing the fastest reversal signals of all major oscillators. This lower indicator excels at catching short-term extremes perfect for weekly option trades, though its speed comes with more false signals. Master Williams %R for precise entry timing on mean reversion trades, but always confirm with price action or other indicators. Remember: %R’s speed is both its greatest strength and weakness – use it for timing, not standalone decisions.