The Williams % R indicator is extremely useful and profitable during sideways, non-trending markets. However, during trends, the Williams % R indicator does not fare as well, leading to losses. Nevertheless, the Williams % R indicator does give tell tale signs of strong trends that can easily be identified by traders for profit. The following chart of the Nasdaq 100 ETF (QQQQ) illustrates Williams % R's ability to detect such trends:
As the chart of the QQQQ illustrate, when the Williams % R indicator stays in the oversold area (below 20) and any bullish rally barely registers with the Williams %R (i.e. fails to go above 80), then the downtrend is strong and a trader should not go long the market.
Similarly, when the Williams %R indicator stays in the overbought area (above 80) and any attempt at a downturn fails to send the indicator into oversold territory (i.e. fails to go below 20), then the uptrend is strong and a trader should not go short.
The Williams %R is a versatile technical indicator used by many; the indicator gives easily intepreted buy and sell signals, and also informs traders whether or not a market is likely overbought, oversold, or trending strongly. The Stochastic indicator (see: Stochastics) would be a logical next step for investigation.
