Guide · Mean reversion
Does Williams %R work?
Across 375 stocks, Williams %R cut the worst fall on 85%, beat buying and holding on risk-adjusted return on 12% and on raw return on 12%. Mainly a seatbelt: it softened the big falls on most stocks, but usually gave up return to do it.
What it predicts
The stochastic turned upside down: 0 is the top of the 14-day range, −100 the bottom. Buy out of oversold, sell out of overbought.
- In when %R crosses up through −80.
- Out when it crosses down through −20.
Mean reversion plays bet that short, sharp moves tend to snap back. The family guide
How to use it
- It trades often (about 13 switches a year per stock), so costs, spreads and taxes eat into it more than the backtest's 0.05% per switch suggests.
- It's right often (61% of calls), but check the size of the misses: a high hit rate can hide a few large losses.
- It worked best on Media & telecom (20% beat holding on risk-adjusted return) and worst on Big tech (0%).
- Use it as one input. Your signal combines the plays you count with the other factors you weight into one call.
When it worked
Williams %R did best against holding in the 2008 crash (+11% median gap) and worst in the 2020–21 rally (−23%). Median gap in return against holding the same stock (per year over stretches longer than 18 months; crypto excluded).
| 2008 crash | Recovery 2009–19 | COVID drop | 2020–21 rally | 2022 bear | Since Oct 2022 | |
|---|---|---|---|---|---|---|
| Williams %R | +11% | −9% | +6% | −23% | +10% | −7% |
Where it worked
By kind of stock: how often it beat holding on risk-adjusted return, and the median Sharpe ratio gap.
| Group | Beat holding, risk-adjusted | Sharpe gap |
|---|---|---|
| Media & telecom | 20% | -0.18 |
| Metals & mining | 18% | -0.17 |
| Semiconductors | 17% | -0.26 |
| Micro caps | 17% | -0.08 |
| Real estate | 16% | -0.17 |
| Financials | 15% | -0.17 |
| Energy & power | 14% | -0.16 |
| Software & devices | 12% | -0.22 |
| Consumer & retail | 12% | -0.23 |
| Healthcare | 11% | -0.15 |
| Industrials & rentals | 11% | -0.13 |
| Industrials & materials | 8% | -0.21 |
| Sectors | 0% | -0.13 |
| Indexes & ETFs | 0% | -0.28 |
| Big tech | 0% | -0.39 |
Where it helped most
Sharpe ratio gap against holding, stocks with 3+ years of history
Right now
Williams %R holds 233 of 377 names as of the Oct 13, 2026 close.
Changed its call in the last two weeks:
Backtest results since 2005 (or as long as each stock has traded), against holding the same stock over the same dates, after 0.05% per switch. Past results don't promise future ones. This analysis does not constitute trading advice. Please meet with an advisor or independently review sources before making any decision.