This particular indicator should only be used when the dominant market trend has been identified and then trades should only be entered with the trend and NOT against it.

The indicator is plotted on an inverted axis from 0 to 100 with trading signals being:

• Go long when %R falls to below 90 and the overall trend is up
• Go short when %R rises above 10 and the overall trend is down

More caustious investors may want to wait until the %R actually reverses and either climbs back above 90 (for long trades) or falls back below 10 (for short trades) to be more confident of an iminent price movement.

Less cautious traders often use 20 and 80 as their momneutm indicators but the average investor should only use these levels as early warnings of potential movements.

The Williams %R indicator is widely regarded as an extremely useful tool to anticipate a short-term market reversal and will regularly form peaks and troughs days before the market does the same. This said it can also be used for much shorter trading horizons and even day trading.

The Williams %R should be a part of every budding investor's technical analysis toolbox.