WILLIAMS%R INDICATOR, A CONCEPTUAL AND PRACTICAL APPROACH

This installment is of an economic nature and is associated with the conceptual and practical understanding of the WILLIAMS%R indicator used as an instrument of speculation in the cryptoactive markets.

In this sense, it is necessary to determine that the indicator WILLIAMS%R (Williams Percent Range (WPR)), is an oscillator that maintains verifiable relationships with the RSI indicator already studied in this disclosure space . The Williams Percent Range (WPR), has as its fundamental objective, to know the speed of the movement of the price of an asset in specific periods of time, for which it is widely used to detect accumulation zones that show changes in trends on the asset.

In this sense, we can establish that the indicator, like the RSI, allows us to evaluate when an asset is overbought and when it is oversold, for which it forms a kind of channel that is used to speculate on the price movements of a given asset.

This theoretical foundation is attributed to Larry Williams, who was the first to carry out this price approach in mid-1973, he established the following principles of analysis and behavior adopted by the indicator:

1. The indicator forms a channel moving from 0 to -100, on the basis of this channel the speculation process is carried out.

2. To assess overbought and oversold levels, a narrower channel is used, so it generates part of -20 for overbought assets and -80 for oversold assets, so when the price of the indicator moves in the lower limit we speculate a change in the direction of the price from bearish to bullish, on the other hand when the asset moves above the upper limit -20 we say that the asset can make a downward correction.

Based on the above, it is possible to detect where the pressure between buyers and sellers is leaning, valuable information that we can use to develop our speculations, hence, when downward pressure is dominant , we will detect movements close to -100 in the indicator, in case the prevailing pressure was bullish, the indicator moves close to the 0 level.

As we can see, the analysis and speculations according to this indicator are basic and it is enough to extend the look to its operation, hence it is interesting for me to highlight how this behavior works statistically and for this we will do a mathematical approach to it.

If we look at the previous image, we realize the device or mathematical formula used by Williams in his calculation and it was based on the opening and closing of the candles in specific time periods, Now, to guide the reader in this regard, we will do a small exercise to demonstrate the operation of the calculation, which we will capture in the following image.

As we can highlight in the previous image, the mathematical equation is designed to be able to quantify the proximity of the price to the outer limits of a recent range, where interpretations such as the following are addressed:

1. A value based on -100% means that the current close is the lowest low of the last 14 periods.

2. A value based on 0% means that the current close is the highest close of the last 14 periods.

3. Values that move in intermediate zones like (-60) show proportionally where the market is between these two previous extreme values.

As you will see, the calculation process is equally simple and although all trading platforms have each indicator configured, it never hurts to know how it works in depth. So in the next installment associated with the WILLIAMS%R indicator we will demo for market entries and exits, so that we can improve our style of technical analysis.

[1] Williams’ Percent Range (%R). Article: Online Access