Williams %R (percent range) is a momentum oscillator that plots where the current price sits within its high-low range over a lookback period, on a scale from 0 to -100. Near 0 means price is at the top of its recent range (overbought); near -100 means the bottom (oversold). It's essentially an inverted, fast cousin of the stochastic oscillator.
What it shows
%R reads overbought/oversold within the recent range. Readings above -20 are overbought; below -80, oversold. But — and this is the key — “overbought” doesn't mean “sell.” In a strong trend, %R can sit pinned in overbought for a long time while price keeps rising. It measures position-in-range, not a reason to reverse.
How to use it honestly
Use %R as a timing filter for level-based reversion trades, not a signal. When price reaches a wall or range extreme in a reversion regime and %R is overbought, that's confirmation the fade has momentum backing — like RSI at a level. %R exiting oversold (turning up from -100) can time a bounce entry off support. The oscillator refines the timing; the level and regime provide the trade.
Overbought isn't a sell signal — in a trend, price rides overbought for hours. %R times fades at levels; it doesn't call tops on its own.
The trap and the limit
The classic mistake is fading “overbought” %R in a trend day — a slow bleed, because the oscillator stays pinned while price runs. %R is context, not prediction, and it's a reversion tool for a reversion regime. Check the regime first, use it at levels, and never trade an overbought/oversold reading in isolation.