From Traderpedia

Definition: A momentum indicator much like the Stochastic Oscillator especially popular for measuring overbought and oversold levels.

The Williams %R indicator was invented by the reknowned Larry Williams. It has a range of 0 to -100, where 0 to -20 is considered to be overbought and -80 to -100 is considered to be oversold.

[edit] Calculation

The calculation for the Williams %R is based on a set number of days (N).

((highest high of N period - todays close)/(highest high N period - lowest low on N period)) * -100

Usually the number of days used for (N) is 14.

[edit] Application

One use of the Williams %R can be on trending days, where the indicator can be used to establish entry points into the trend.

It should be remembered that the Williams %R is just and indicator and an overbought or oversold indication on it does not necessarily mean that the price is about to turn. It is better to wait for the price to actually show a marked reversal and then using the Williams %R as a confirmation of this.