The William indicator W%R is also known as the William Overbought and Oversold indicator, referred to as the William indicator. It was invented by Larry William in 1973 and is a commonly used short-term research indicator in the technical analysis of foreign exchange markets.

Principle and calculation method of W%R indicator

The principle of William indicator

The William indicator mainly judges the overbought and oversold phenomenon in the foreign exchange market by analyzing the relationship between the highest, lowest and closing prices of the exchange rate over a period of time, and predicts the short-term trend of the exchange rate. It mainly uses the oscillation point to reflect the overbought and oversold behavior of the market, analyzes the comparison of the strength of the long and short sides, and then puts forward an effective signal to study the trend of the short-term behavior of the market. The William indicator is a technical analysis indicator that studies the exchange rate volatility. The formula design is similar to the principle of the random index. Both are based on the study of the exchange rate volatility, by analyzing the maximum, minimum, and closing prices of the exchange rate over a period of time. These three relationships reflect the strength of the market’s buying and selling momentum, so as to examine the staged market sentiment, determine the degree of deviation between the price and the rational investment value standard, and like other technical analysis indicators in the foreign exchange market, the William indicator can be applied to each market. The research and judgment of the cycle, generally speaking, the William indicator can be divided into various cycles such as day, week, month, year, 5 minutes, 15 minutes, 30 minutes, 60 minutes and so on. Although the research and judgment of the William indicator of each period are different, the basic principles are similar. For example, the William indicator is the relative position of the closing price of the current day in the entire price range of the past period, and the highest price in these days is subtracted from the closing price of the day, and then the difference is divided by the entire period The price range can be obtained from the William indicator of the day. When calculating the William indicator, the calculation parameters must first be determined. This number can take half of a buying and selling cycle. Taking the day as the trading cycle as an example, usually the selected trading cycle is 8 days, 14 days, 28 days or 56 days, etc., deducting Saturday and Sunday, the actual trading day is 6 days, 10 days, 20 days or 40 days, etc., half of them are 3 days, 5 days, 10 days, 20 days, etc.

Calculation method of W%R indicator

The calculation of the W%R indicator is mainly carried out by analyzing the relationship between the highest price, the lowest price and the closing price at the end of the period. Taking the William indicator as an example, its calculation formula is:
W%R=(Hn—C)÷(Hn—Ln)×100
Among them: C is the closing price of the calculation day, Ln is the lowest price in the N period, Hn is the highest price in the N period, N in the formula is the selected calculation time parameter, generally 4 or 14.
Taking the calculation period as 14 days as an example, the calculation process is as follows:
W%R(14th)=(H14—C)÷(H14—L14)×100

Among them, C is the closing price on the 14th day, H14 is the highest price within 14 days, and L14 is the lowest price within 14 days.

The William indicator represents the relative position of the closing price of the day in the entire price range in the past period of time. Therefore, the calculated W%R value is between 0 and 100. The closer to the value of 0, the closer the current price is to the lowest price in the past 14 days; the closer to the value of 100, the closer the current price is to the highest price in the past 14 days. From this point of view, it may be easier to judge the William indicator understanding.
Due to the different calculation methods, the scale of the William index is the same as the random index W%R and the relative strength index RSI in some books in the same order, that is, the upper bound is 100 and the lower bound is 0.