Theory:
Williams %R, often referred to simply as %R, is a technical analysis oscillator that gauges the current closing price in relation to the highest and lowest prices over a specified period (N days). Developed by trading author Larry Williams, its main goal is to indicate whether a stock or commodity is trading near its recent highs, lows, or somewhere in between.
%R = -100 x (highest high (period) - close) / (highest high (period) - lowest low (period))
This oscillator operates on a negative scale ranging from -100 (lowest) to 0 (highest), contrasting with the more typical 0 to 100 scale seen in many other technical indicators. A value of -100 indicates that today’s close was the lowest low in the last N days, while a value of 0 signifies that today’s close was the highest high over the same period (although the %R can sometimes be adjusted by adding 100).
One challenge with the Williams %R is that it can be quite volatile, often leading to false signals when traders rely on standard levels for entries or exits. To address this, some traders have attempted to create smoother versions of the %R, but this often resulted in added lag. Our version, however, takes a different approach: it utilizes EMA-smoothed prices for its calculations, which drastically reduces the number of signals and produces a much smoother output without significant lag.
Usage:
You can use the Smoothed Williams %R just like you would with the standard version.
PS:
For a visual comparison, the chart above displays the regular Williams %R at the top, while the Smoothed version is shown below.
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