Quite possibly one of the most unpredicatable momentum indicators ever due to its poor track record, we will study the Williams %R for the sake of our continued study on Oscillators. It is very similar to a stochastic oscillator.

It was developed by Larry Williams, a prestigious commodities trader. It is particularly used to measure overbought and oversold signals. It works by measuring the closing price of an asset, then comparing it to the high-low range over a specified period of time. The nearer the close is to the high of the range, the closer to 0 the indicator will be. The nearer to the low of the range, the nearer to -100 the indicator will be.

Most often it is used with a 14-day period, however, the time frame should be adjusted according to the volatility of each individual asset.

The reason why it is has a poor track record is because overbought and oversold indicators don't always mean time to sell or buy. Assets can remain in overbought or oversold states for months while not changing the trend. Once an overbought or oversold indicator is seen, wait for any another unidentical indicator for price reversal.

For a bullish sign, look for a reading below -80. For a bearish sign, look for a reading above -20.