when the indicator is between 20 and zero the price is overbought or near the high of its recent price range when the indicator is between 80 and 100 the price is oversold or far from the high of its recent range 
during an uptrend traders can watch for the indicator to move below 80 when the price starts moving up and the indicator moves back above 80 it could signal that the uptrend in price is starting again the same concept could be used to find short trades in a downtrend when the indicator is above 20 watch for the price to start falling along with the williams r moving back below 20 to signal a potential continuation of the downtrend traders can also watch for momentum failures during a strong uptrend the price will often reach 20 or above if the indicator falls and then can t get back above 20 before falling again that signals that the upward price momentum is in trouble and a bigger price decline could follow the same concept applies to a downtrend readings of 80 or lower are often reached when the indicator can no longer reach those low levels before moving higher it could indicate the price is going to head higher the difference between williams r and the fast stochastic oscillatorthe williams r represents a market s closing level versus the highest high for the lookback period conversely the fast stochastic oscillator which moves between 0 and 100 illustrates a market s close in relation to the lowest low the williams r corrects for this by multiplying by 100 the williams r and the fast stochastic oscillator end up being almost the exact same indicator the only difference between the two is how the indicators are scaled limitations of using the williams roverbought and oversold readings on the indicator don t mean a reversal will occur overbought readings actually help confirm an uptrend since a strong uptrend should regularly see prices that are pushing to or past prior highs what the indicator is calculating the indicator can also be too responsive meaning it gives many false signals for example the indicator may be in oversold territory and starts to move higher but the price fails to do so this is because the indicator is only looking at the last 14 periods as periods go by the current price relative to the highs and lows in the lookback period changes even if the price hasn t really moved 