Williams’ Percent Range (WPR) Indicator – Finding Better Trades With Overbought And Oversold Levels
Williams’ Percent Range is a dynamic technical indicator that determines the state of overbought-oversold. The meaning of the WPR indicator is that it measures the ability of bulls and bears to close prices every day near the edge of the range over the past period.
The analysis is carried out on the basis of studying the position of the current closing price in the range formed by extremum for previous periods. This trading tool was developed by the famous trader Larry Williams and George Lane.
The indicator line is calculated by the formula:
WPR = (MAX (HIGH (i - n)) - CLOSE (i)) / (MAX (HIGH (i - n)) - MIN (LOW (i - n))) * 100
There is one input parameter in the settings of the WPR indicator - ExtWPRPeriod. By default, its value is 14. It was this value that was recommended by the creators of the indicator. This value can be configured depending on the timeframe and type of trading strategy.
As known, the location of the price level can be considered an indicator of market equilibrium at a particular point in time. The maximum value characterizes the highest strength of buyers in the considered trading range. The minimum displays the ultimate strength of sellers. The closing price reports which of these groups won a local victory in the ended period, as well as how convincing this gain was.
By comparing the new prices with the latest trading range, the user has the opportunity to visually see if the “bulls” were able to finally gain a foothold near the high of the range or, conversely, the bears that turned out to be stronger were located near the low.
If in the presence of an uptrend, the closure occurred far from the peak, then the position of buyers is weaker than previously thought, and you should think about selling. An overbought zone is a range from -20 to 0.
If the trend is downward, but the “bears” did not manage to catch near the minimum, we can talk about the weakening of sellers, and begin to look for opportunities to buy. The oversold area is between -100 and -80.
Using this indicator, you can receive signals:
- Overbought and oversold . Signals announcing oversold or overbought occur when the chart line falls into the corresponding zones.
- Divergences. Divergence signals on the Williams ’Percent Range are relatively rare, but they are confirmed in the vast majority of cases. If the price reaches a new maximum, and the indicator curve has not dropped compared to the previous value, we can talk about the near termination of the bullish trend. This is the most favorable moment for the sale of an asset. When the price updates the minimum, and the indicator line, on the contrary, increases slightly, a signal appears about the damping of the downtrend and the relevance of the purchase.
- Entrance according to the trend. If the trend is upward, usually the chart line falls into the oversold zone. As soon as this happens, immediately open a long position. With a downward trend, the appearance of a curve in the overbought area is a signal to create a short position.
WPR indicator is one of the most effective trading tools among a number of technical indicators. We recommend using the indicator as a filter when working with other technical indicators. In this case, its use will be as effective as possible.
Download the Williams’ Percent Range (WPR) indicator from the button below
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Do you need help with installing this indicator into MT4 for Windows or Mac OS? Our guide HERE will help you.