The Williams Percent Range will represent the level that the market closed versus the highs of the range that the indicators looked back, normally 14 days. Having said that, it’s the exact opposite of the fast stochastic oscillator, which moves between 0 and 100. In that indicator, the measurement is from the lows of the look back range. In other words, it’s the exact opposite of that indicator and therefore they are somewhat interchangeable.
However, there are certain limitations that you need to be aware of when it comes to using the Williams Percent Range indicator, and due to this, you need to use other indicators to be relatively comfortable using it. It does tend to be a bit overly responsive, meaning that it can give false signals, and this is why it’s normally only a piece of a system, not a complete system by itself. Some people will use a longer-term setting to slow down some of the false signals, but at that point it becomes a guessing game as to when it becomes responsive enough.
This isn’t to say that the indicator can’t be used, just that it can’t be used by itself. Furthermore, a lot of traders will not only use a moving average with the Williams Percent Range indicator, but also set up a Williams Percent Range strategy by using it with the exponential moving average, or EMA and perhaps some type of candlestick analysis. For example, if you get everything lined up and get a hammer or a shooting star, that only adds more credence to any type of signal that you may be looking at.
The Williams Percent Range indicator tells you when the markets are going back to normal momentum
The Williams Percent Range indicator does tend to give off a lot of quick signals
The Williams Percent Range indicator can be used in a trend or consolidation
The Williams Percent Range indicator needs to be used with other indicators
Because of the limitations, the Williams Percent Range indicator can be a part of the system you use to trade Forex, but, quite frankly, it’s not reliable enough to use by itself to generate your trade ideas. In fact, Larry Williams didn’t use the oscillator by itself for trading, and used it in congruence with other indicators. And because the author of the indicator didn’t use it as a standalone system, neither should you.