Technical Analysis - Common Indicator Uses
William Indicator: Learn to oversell and oversell
What is the William Indicator?
The William Indicator (WMSR), also known as the “William Index” or “Overbought and Oversold Index”, is a classic momentum swing indicator primarily used to measure overbought and oversold.
The William Indicator was first proposed by renowned commodities trader Larry Williams in his 1973 book How I Made a Million Dollars.
The principle of the indicator is to assess the market's overbought and oversold status by assessing where the current closing price is in this range, by assessing where the current closing price is in this range, to assess the market's overbought and oversold position.
The value of the William indicator is between 0~-100. The closer it is to 0, the greater the overbought level; the closer it is to -100, the greater the oversold level.
Parameters and calculation methods for the William indicator
The only parameter for the William indicator is the time period, which is usually set to 14 days (daily chart).
William Metric Calculation Formula
William Indicator = (14-day high - recent closing price)/(14-day high - 14-day low) ×-100.
In the formula, the multiplication by -100 is to reverse calibrate the value of the William indicator.
For example, A stock currently has a closing price of $105, with a high of $120 in the past 14 days and a low of $100.
Based on the above data, we can derive the current William indicator of A stock = (120-105)/(120-100) ×-100=-75.
The William Indicator =-75 indicates that the current closing price of A stock is at a lower level compared to the reference range of highs and lows over the past 14 days.
Key Points of the William Indicator
The William indicator with -50 as the middle axis, greater than -50, indicates that the transaction is above the multi-empty threshold (bullish); less than -50 indicates that it is below the multi-empty threshold (bearish).
The William indicator is at -20~0, generally considered overbought; at -80~-100, it is generally considered oversold. (Note: Overbought, oversold does not mean that the transaction will reverse, and this situation may persist for a longer time.)
When the William indicator breaks out of the overbought, oversold region, and crosses the mid--50 axis, it is usually indicative of a multi-momentum hair-growth shift.
When the market is in a strong up/down trend, the Williams indicator may continue to hover in the overbought, oversold area, which usually indicates a strengthening rather than a reversal.
William Indicator Case Analysis
William Indicator Case 1
Below, we take Apple's 14-day William indicator as an example.
Figure 1 shows that the share price is in a strong uptrend, while the Williams index hovers near the overbought area (indicating that the share price continues to close near the 14-day high). This can be seen as a reinforcement of the uptrend.
William Indicator Case 2
Figure 2 shows that after a period of uptrend, the Williams indicator first broke out of the overbought region (above -20), followed by a further fall through the -50 break-even line. This could mean that the move will shift from bullish to bearish.
Limitations of the William Indicator
When the William Indicator is in an overbought or oversold state, it does not mean that the price will necessarily reverse.
The William indicator can often release false signals, especially in turbulent markets.
The William Indicator should not be used alone for trading, but can be used as a warning signal to aid decision making.
William Metrics Overview
The William indicator is a classic momentum swing indicator primarily used to measure overbought and oversold.
The values of the William indicator range from 0~-100. Traditionally, 0~-20 is defined as the overbought area, and -80~-100 is defined as the oversold zone. However, for the definition of overbought or oversold, investors can adjust them in combination with reality.
Note that when the William indicator is in the overbought and oversold zone, it does not always mean that the price is about to rebound, in fact it often indicates a strengthening of the trend.
This content discusses technical analysis, and other approaches, including fundamental analysis, may provide different perspectives. The examples provided are for illustrative purposes only and do not reflect the expected results. All investments involve risk, including the potential loss of principal, which cannot guarantee the success of any investment strategy.
