Let’s look at determining trend strength using %R.
Williams %R’s sensitivity to volatile prices comes in handy when you want to know if prices are maintaining their bullish or bearish momentum.
In EUR/USD’s daily chart below, you can see that the pair tried to extend its uptrend but failed to reach a new price and %R highs.
This means that prices aren’t hitting the high end of their range as quickly as they did before and that the bullish momentum might be running out of steam.
In this case, the pair ended up dropping 200 pips in a week!
Almost immediately after that, the price gained enough bullish momentum to push %R above its oversold levels.
But although EUR/USD is still popping up red candlesticks, they’re not enough to drag Williams %R back to its previous lows.
Another loss of momentum?
Williams %R sure thought so!
Turned out, the bulls DID take over and pushed EUR/USD around 775 pips higher in less than 30 days.
Now that’s good oscillating right there. No wonder superfans call Williams %R as “The Ultimate Oscillator!”
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