WILLIAMS' PERCENT RANGE
Williams' Percent Range is a leading indicator, as we mentioned in a previous article, a leading indicator predicts future values of the price taking all the information contained until the last period of time. This technical Indicator tries topredict when the market is overbought or oversold. Described on the article "The philosophical concept behind stochastic oscillator" another technical indicator called stochastic oscillator, as we will see this indicator is close related with the Williams' Percent Range. The mathematical expression of the Williams' Percent Range is:
|Williams' Percent Range =||(Higher Price T-1 - Close Price T-1)||* (100)|
|(Higher Price T-1- Lower Price T-1)|
Higher Price T-1: is the higher price of the pair that you are trading one period before than the time frame you are using.
Lower Price T-1: is the lower price of the pair that you are trading one period before than the time frame you are using.
Close Price T-1: is the close price of the pair that you are trading one period before than the time frame you are using.
Do not try to memorize this mathematical expression, your Forex trading MT4 will make the calculus for you, just try to understand this basic concept.
Check that each time the currency price increases, the Williams' Percent Range will increase because the higher the price will be equal or more than the close price. Each time that the currency price decreases, the Williams' Percent Range will decrease because the higher price will be equal or less than the close price. Williams' Percent Range will obviously be a number between 0 and -100.
You could add this indicator to your Metatrader 4 trading platform setting the two main parameters:
- Period and Levels. Period is the number of time frames to be included in the calculation of the formula.
- Levels are the bands that you determine as levels of reference to predict the oversold and overbought levels. Commonly traders use -20% and -800%. When the Williams' Percent Range is higher than -20% we say that the market is overbought. When the Williams' Percent Range is lower than -80% we say that the market is oversold.
As you would conclude Williams' Percent Range and stochastic oscillator are very similar, you could use both to obtain a better technical analysis!