The DoubleTrends™ Signal

Williams %R, in one formula

Larry Williams introduced %R in 1973 as a momentum oscillator for futures markets. The whole indicator collapses to a single equation:

Read in English: take the highest high over the past n bars and the lowest low over the same window. Where does today's close sit inside that range? Express it as a percentage, then flip the sign so the indicator is bounded between −100 (close at the low) and 0 (close at the high).

That is the whole tool. There is nothing fancy underneath — no machine learning, no proprietary normalization, no Fed model. Just “where in the recent range did we close, on a fixed scale.”

Close to −100 means exhausted

The convention is that %R values near −100 indicate an oversold market — the close is pinned to the bottom of its recent range — and values near 0 indicate an overbought market. Practitioners typically draw two horizontal threshold lines (commonly −80 and −20) and treat readings beyond them as the working extremes.

Williams %R is in the same family as RSI and Stochastics. All three answer the same general question (“is price stretched relative to its recent range?”) with slightly different math. %R uses the simplest version: the close inside the high-low envelope, no internal smoothing, no rate-of-change calculation. That simplicity is part of why it is durable.

Noisy or laggy — pick one

Run %R on a single window and you are forced into a tradeoff. A short window reacts quickly. It catches every minor pullback, including the ones that mean nothing, and it pings into “oversold” on routine 2–3% dips. A long window ignores small wobbles but lags badly: by the time the indicator confirms an oversold turn, the bounce is already weeks old.

This is the same dilemma every momentum tool faces. The honest answer is that no single window length is right for both noise rejection and timeliness. You either accept false alarms, or you accept being late.

EMA over the raw line

Raw Williams %R is jagged. A single down day can push it from −60 to −95 and back. Acting on the raw value means acting on noise. The standard fix is to smooth %R with an exponential moving average (EMA), which weights recent values more heavily than older ones. An EMA dampens day-to-day chop without adding much lag — the line still bends at the same time, it just stops shaking.

The DoubleTrends™ engine smooths both of its %R lines this way. The shapes do not change, but the noise floor drops, and the threshold crossings become meaningful.

The short clock and the long clock

The core idea of DoubleTrends™ is to stop picking between “noisy and fast” vs “clean and slow” — and to require both at once. The engine runs %R on two windows and smooths each:

When both lines sit at or below the deep-oversold threshold, the market is exhausted on the short clock and the long clock simultaneously. One alone is noise; both together is structural stress.

Oversold first, then the turn

Deep-oversold by itself is a warning, not a signal. Markets can stay oversold for weeks. The actual DoubleTrends™ trigger is the exit: the bar where both smoothed %R values rise back above the deep-oversold threshold after having sat below it on the prior bar.

That moment — not the descent into oversold — is what gets passed up to the regime gate and the confirmation gate. This matters because waiting for the turn instead of the entry kills a class of false alarms automatically. Markets that go deeply oversold and stay there do not fire. Only the ones that bend back up do.

A dip-buying tool, not a top-caller

Williams %R is symmetric — it computes overbought extremes near 0 as cleanly as oversold extremes near −100. DoubleTrends™ ignores the overbought half entirely. The reason is empirical: on broad-index daily charts, oversold reversals carry strong forward expected returns; overbought reversals do not. Markets can stay overbought for years (look at any structural bull run) without producing exploitable reversals. The asymmetry of long-only equity drift is the reason.

So the engine reads only the side where the math has historically paid. It is a dip-buying tool, not a top-calling tool.

The reversal is one of three gates

A raw reversal candidate by itself is not the customer-facing signal. The full product layers two more gates on top: a four-state regime classifier that throws out reversals in calm or correction markets, and a confirmation gate that requires more evidence in bear regimes than in panic regimes.

Williams %R, doubled, is what fires the candidate. The regime classifier decides whether to listen. The confirmation gate decides whether the candidate is strong enough to publish.