WilliamsR divergence indicator with alert for NinjaTrader 8.

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Divergence is very common and useful in technical analysis. It indicates possible reversal signals when there are discrepancies between WilliamsR and price movement.

Williams %R divergence is a valuable tool for traders because it provides early warnings of weakening momentum at critical market extremes, often signaling potential reversals before they appear in price action. Here's why it's useful and how to apply it:

Core Value of Williams %R Divergence

Unlike MACD or Stochastic (which measure momentum broadly), Williams %R specifically focuses on overbought/oversold conditions (-20 to 0 for overbought, -80 to -100 for oversold). Divergence occurs when price and Williams %R move in opposite directions, revealing hidden weakness in trends even as price reaches new extremes.

Key Benefits & Why Traders Use It

1. High-Probability Reversal Signals at Extremes

• Bullish Divergence:
  → Price makes a Lower Low (LL).
  → Williams %R makes a Higher Low (HL) (i.e., fails to reach its prior oversold low).
  → Signals: Selling exhaustion. A bounce is likely.
  *Best when occurring near -80 to -100 (oversold)*. 
  Price makes lower lows, but Williams %R forms higher lows → momentum is weakening.

• Bearish Divergence:
  → Price makes a Higher High (HH).
  → Williams %R makes a Lower High (LH) (i.e., fails to reach its prior overbought high).
  → Signals: Buying exhaustion. A pullback is likely.
  *Best when occurring near -20 to 0 (overbought)*. 
  Price makes higher highs, but Williams %R forms lower highs → upside momentum fading.

2. Confirms Overbought/Oversold Zones

• Williams %R lingering in oversold (-80 to -100) or overbought (-20 to 0) is common in strong trends.

• Divergence adds conviction:

  • A bullish divergence in oversold territory = Strong buy signal.

  • A bearish divergence in overbought territory = Strong sell signal.
    → Prevents "false" reversals from pure overbought/oversold readings.

3. Sensitivity to Short-Term Exhaustion

• Williams %R reacts faster than MACD or Stochastic.

• Ideal for spotting intraday or swing reversals (e.g., scalping, day trading).

4. Avoiding False Breakouts

• If price breaks resistance but shows bearish divergence → likely a fakeout.

• If price breaks support but shows bullish divergence → likely a bear trap.
   

Limitations & How to Trade Safely

1. Not a Standalone Signal:

   • Always confirm with:

     • Price action (support/resistance, trendlines).

     • Volume (rising volume on reversal).

     • Candlestick patterns (hammers, engulfing bars).

     • Multi-timeframe alignment (e.g., divergence on daily + hourly).

2. False Signals in Strong Trends:

   • In parabolic moves, divergence may appear early → wait for price confirmation (e.g., break of structure).

3. Adjust Settings for Volatility:

   • Default period = 14. Use shorter periods (e.g., 7) for day trading, longer (e.g., 21) for swing trades.

4. Hidden Divergence for Continuation:

   • Hidden Bullish: Price Higher Low (HL) + Williams %R Lower Low (LL) → Uptrend resuming.

   • Hidden Bearish: Price Lower High (LH) + Williams %R Higher High (HH) → Downtrend resuming.

Why Williams %R Divergence Stands Out

• Laser-Focus on Extremes: Best for spotting reversals at -80/-20 levels.

• Early Warnings: More sensitive than MACD.

• Simplicity: Clear visual divergences on charts.

→ Combines the strengths of overbought/oversold indicators (like Stochastic) with divergence’s predictive power.

Key Takeaway

Williams %R divergence shines when:

1. Price is at key support/resistance,

2. The indicator is extremely overbought or oversold,

3. Confirmation aligns (price patterns, volume).

It’s a tactical tool for timing reversals in mean-reverting strategies—especially in ranging markets or exhausted trends. Always use it within a broader technical framework!


 

The definition of divergence is when price and indicator move in different directions

for instance, when price is in uptrend and reaches a higher high where the indicator is in downtrend.

Features and inputs:

1. Instant signal on current (last) bar, no repaint.
2. Three range mode:Short, Mid and Long to check divergence.
3. Four plots can be used from other NinjaScript: Bullish Regular Signal, Bearish Regular Signal, Bullish Hidden Signal and Bearish Hidden Signal
4. Alert when a signal appears.
5. Select different sound alert files.
6. Enable to show lines between Highs and Lows.
7. Please note: it doesn't work in Renko chart.
8. Market Analyzer with alert. You can add new sound files to your NT8\sounds directory.
9. Wait 1 bar: enable this new feature will display the signal 1 bar later in order to check the trend direction of both price and related indicator, otherwise, it will display the signal on current bar. We consider this feature as a 1 bar confirmation for divergence signals.

There will be a 'H' drawn under a hidden divergence.