1991issue C061-4
Audit inverse-range oscillators before stacking stochastic %K and Williams %R
Both stochastic %K and Williams %R locate the current close inside a recent high-low range. With the same lookback-window they share one high-low span, invert the numerator, and produce matching charts, so stacking both for one task is redundant.
- Both the stochastic oscillator %K and Williams %R are overbought-oversold oscillators that locate the current close inside a recent high-low range.
- Stochastic %K and Williams %R share one high-low span and differ by inverse-numerator: close minus the lookback low versus the lookback high minus the close.
- When the lookback-window length is the same, the constructions produce matching charts, so stacking both for one task is redundant.
- A simple moving average can describe intermediate-to-long trend direction but is not built to warn of reversal, while an oscillator can flag fading momentum and remains a poor trend-direction tool.
One close inside a recent high-low range
Both the stochastic oscillator %K and Williams %R are constructed as overbought-oversold oscillators that locate the current close inside a recent high-low range. The lookback-window is the fixed count of recent sessions from which the highest high and lowest low are taken.
The stochastic oscillator is a range oscillator whose unsmoothed %K line places the close between the lookback low and high and scales that ratio to a percentage. Williams %R is a range oscillator that places the close by its distance from the lookback high, using the same high-minus-low span as stochastic %K.
How the two constructions invert
Stochastic %K is built as the close minus the lowest low of the lookback-window, divided by that window's high-low span, then scaled by 100. Williams %R is built as the highest high minus the close, divided by the same high-low span used for stochastic %K, then scaled by 100.
The two ratios are algebraic inverses. Inverse-numerator is the construction choice of measuring close-minus-low versus high-minus-close on an otherwise identical ratio. Stochastic %K measures the close against the lookback low, while Williams %R measures the close against the lookback high.
Matching charts and a redundant stack
When the same lookback length is used, the two constructions produce matching charts, so stacking both for one task is redundant. The stochastic oscillator also has a %D line that is a three-day smooth of %K, and that smooth is not required to compare %K with Williams %R.
The illustrated comparison used a five-day lookback on a daily bond-futures bar chart, with only residual plotting differences attributed to computer rounding.
Trend direction and fading momentum
A simple moving average can describe intermediate-to-long trend direction but is not built to warn of reversal, whereas an oscillator can flag fading momentum while remaining a poor trend-direction tool.
All readings on this track · 13 readings
- 1987Constructing a volume-confirmed Williams %R
- 1991Audit inverse-range oscillators before stacking stochastic %K and Williams %R
- 1991Signed midpoint range oscillator from stochastic and Williams
- 1993Confirm an intradate candlestick only after a longer cycle reprints it
- 1994Building average directional index, the stochastic pair, and Williams percent R from highs, lows, and closes
- 1994Label the tape before you read stochastic or Williams %R
- 1996Calibrating Williams %R entries in rising channels
- 1997Dynamic zones for oscillator buy and sell levels
- 1998Regression channels anchored to Williams %R turning windows
- 1999Constructing isolated synthetic waveforms to watch indicator settling
- 2000Choosing a scale for moving-average oscillators
- 2004Splitting entry and exit speed by regime
- 2008Count the run, then confirm the pivot at a channel edge