Stochastic RSI vs Williams %R
The stochastic relative strength index applies the stochastic formula to relative strength index values and usually carries a smoothed signal line. Williams percent r measures where the close sits inside the recent high-low range directly, with no smoothing at all.
These two are more alike than most pairs on this site. Both are bounded, both answer a question about where price sits inside a recent range, and both are read the same way. What separates them is how much processing happens between the price and the number you look at.
What each one is
Williams percent r measures where the close sits inside the recent high-low range, expressed from minus one hundred at the bottom to zero at the top. There is no smoothing. Williams %R covers it.
The stochastic relative strength index applies the stochastic formula to relative strength index values, then usually smooths the result and adds a signal line. Stochastic RSI covers it, and RSI covers the input.
One reads price directly and the other reads an indicator. Williams looks at the actual high, low and close. The stochastic version looks at where a relative strength index reading sits inside the range of its own recent readings, whereas nothing in that calculation touches the bar’s high or low.
Where they differ
Whether anything is smoothed away. Williams percent r shows you every jump. The stochastic version’s signal line irons those out, which makes it far easier to trade and also means the chart no longer shows you how noisy the underlying reading was.
What the range is measured against. Williams uses the highest high and lowest low of the lookback — the actual extremes of the bars. The stochastic version uses the highest and lowest relative strength index readings, which is a range of a statistic and can be narrow even when price moved a lot.
How you are meant to act. Williams gives you a level and leaves the decision to you. The stochastic version gives you two lines and a crossing, which is a discrete event and therefore something a rule can be written around.
How much the high and low matter. Williams is built from them, so a bar with a long wick and a close back in the middle registers as such. The stochastic version never sees a wick, because the relative strength index it is built on is computed from closes.
Where they agree
Both are bounded and both pin. In a sustained move each reaches its extreme and stays, so neither can report that a trend has got stronger.
Both are misread as reversal signals. An extreme reading means the recent move was strong, and strength is what a trend is made of — so the warning arrives at the start of the thing it is used to bet against.
Both fight the same drift. On this site’s shared series 54% of 566 ten-bar windows finished higher than they started.
And both cost a round trip when acted on — 0.0098 here, about 2% of the median bar range of 0.493.
Which one to use
Run williams percent r when you want to see the actual state. No smoothing means no lag and no flattering. If the reading is jumping around, that is the market being noisy and you should know it.
Run the stochastic relative strength index when you need a discrete event to act on. A crossing is unambiguous, and a rule you can write down is worth real money against a level you interpret differently on a good day and a bad one.
Run williams percent r when the wick matters to you. It is built from highs and lows, so a rejection bar shows up in the reading; the stochastic version cannot see it at all.
And do not run both. They are near enough the same measurement — the fast line of a stochastic and williams percent r differ mainly in sign convention — so a chart with both is one reading drawn twice.
What smoothing actually costs
It converts a level into an event, and it delays that event. The crossing happens after the raw reading has already turned, which is the same trade-off every smoothed indicator makes — fewer false moves, each one later.
And it hides the condition that should stop you trading. A raw oscillator slamming between extremes is telling you the market is disorderly. Smoothed, that same stretch looks like a series of orderly crosses.
The original data
Of the 24,971 unique videos in the search corpus, no title compares these two directly. Williams percent r appears in 46 titles at a median of 3,253 views across 45 channels. The stochastic relative strength index appears in 25, at a median of 26,139 across 23.
Twice the videos, an eighth of the audience. Williams percent r is taught more and sought far less, which fits a tool that has been standard for decades and carries no novelty. Almost every one of those 45 channels made one video and moved on.
On the chart above they are not disagreeing. The raw reading is what is happening now; the smoothed one is waiting for confirmation. Choosing between them is choosing how much confirmation you want to pay for.
When it fails
The characteristic failure is running both and calling it agreement. Williams percent r and the fast line of a stochastic measure the same thing — position within a recent range — and differ mainly in what range they use and which way the scale runs. When they agree you have learned nothing you did not have from one of them, and the moments they disagree are the moments the smoothing is hiding noise the raw tool is reporting honestly. Two readings of one measurement cannot check each other, whereas a volume measure or a structure read genuinely can.
A second failure is using either as a standalone sell in a trend. Both pin, and pinned means the move is strong rather than finished.
A third is treating the stochastic version’s range as a price range. It is the range of an indicator’s own readings and can be narrow on a bar where price moved sharply.
A fourth is tuning the lookback until the last reversal is caught, which fits the sample and nothing beyond it.
And a fifth is trading either without a condition filter, which is what makes the extremes constant.
Related
Williams %R covers the raw range-position reading. Stochastic RSI covers the twice-derived construction and the signal line. And RSI covers the measure the stochastic version is calculated from.
These two are closer than either is to anything else, and people run both. Williams percent r and the fast line of a stochastic are near enough the same measurement flipped in sign, so a chart carrying both is one reading drawn twice in different colours.
— Michael Whitman
This page is educational, not financial advice. Test every idea on your own charts before risking money.