What it measures

Larry Williams' %R measures where the close sits relative to the highest high of the lookback, expressed as a negative number: 0 when the close is the high of the range, −100 when it is the low. It is the stochastic's K line flipped and shifted, and it is read the same way.

The calculation

%R = (highest high of n bars − close) / (highest high of n bars − lowest low of n bars) × −100

Compare the stochastic K = 100 × (close − lowest low) / (highest high − lowest low). The two carry exactly the same information: %R = K − 100.

Inputs and defaults

  • Length: 14.
  • Thresholds: −20 (overbought) and −80 (oversold).

How it is read

Readings above −20 mean the close is near the top of the range, read as overbought; below −80 as oversold. Williams used it with a longer lookback as a trend tool: in an uptrend the indicator should keep reaching 0 and should stop doing so when the trend tires.

Where it fails

Everything that fails for the stochastic fails here, because it is the same number: it pins in trends, and it uses a single close against a range with no smoothing, so it is noisy. Strategies that use both %R and the stochastic are using one indicator twice.

How the desk reads it

In the screen it appears in a handful of short-timeframe reversion rules, read like the stochastic they duplicate: after fees, and on what the thresholds did in the trending year.

In the desk's screen

Of the 614 screened strategies in the library, 6 (1.0%) use this indicator somewhere in their logic.

3 of those were gross-profitable on enough cells to reach the after-fee replay.

The count is read from the compiled code of each strategy in the library; a strategy that computes the indicator by hand under another name is not counted. The desk's own rules are not part of the count.