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Williams %R Reversionposition in the range, unsmoothed

Evidence: WeakBeginnerMean reversion · Oscillator

Williams %R answers one question and nothing else: where did this bar close inside the high-low range of the last N bars? At −100 it closed at the very bottom of it; at 0, at the very top.

It is the rawest measure in this book — no averaging, no smoothing, no deviation. That makes it the fastest to react and the noisiest, which is why it needs a longer lookback than most people give it.

The evidence here is for reversion itself, not for this particular measure of it. The ruler below is a way of deciding when price has stretched far enough — it is not what makes it come back.

Category
Mean reversion · Oscillator
Timeframe
H1 primary · H4 for context
Suitable pairs
EURUSD · GBPUSD · USDJPY
Session
Signal at the bar close · London and New York
Indicators / tools
Williams %R(28) · SMA(50) as the trend filter · ATR(14)

Valid setup

MR-08 · WILLIAMS %R REVERSION — VALID SETUP GBPUSD · H1 · unsmoothed, so the line whips about — note the two separate thresholds LONG 1.26108 1.26179 1.26249 1.26320 1.26391 1.26462 1.26533 to the mean 1R SMA(50) — long-only above it TARGET = %R at −50 ENTRY STOP 1 2 3 4 1.26306 1.26262 1.26150 Williams %R(28) — raw, no smoothing at all −90 in −80 out −50 target ① Chop with no direction — but price holds the SMA(50) ② %R closes under −90 at the spike low ③ 28-period lookback, not 14: the short setting fires constantly ④ %R closes back above −80 — two thresholds, not one ⑤ Stop 1.5 × ATR below the spike ⑥ Out at −50, the midpoint of the lookback range

Exact rules

Entry

  • Use a 28-period lookback, not the default 14. The shorter setting on an unsmoothed measure produces signals faster than price can move.
  • Trend filter: price above the SMA(50) means long-only.
  • Setup: %R closes below −90.
  • Trigger: %R closes back above −80. The two thresholds are deliberately different — a single line produces a signal every time the reading flickers across it.
  • Enter at that bar's close.

Stop loss

  • 1.5 × ATR(14) below the excursion low.
  • The measure is unsmoothed, so the stop has to absorb noise the indicator does not.
  • Risk 0.5%.

Take profit / exit

  • %R reaching −50 — the midpoint of the lookback range.
  • Time exit after six bars.
  • No trailing.

Build Williams %R Reversion

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More from Mean reversion

RSI(2) Extremesthe short-period oscillatorBollinger Band Fadetwo standard deviationsZ-Score Reversionthe distance, stated plainly

Trading carries risk and most retail accounts lose money. Nothing on this page is financial advice or a recommendation to trade. The chart is an illustration of the rules on constructed candles — it is not a record of a trade and not a backtest.