Ultimate Oscillator

Ultimate Oscillator

It is a technical analysis indicator that measures the price momentum of an asset across multiple timeframes. This indicator, developed by Larry Williams in 1976, represents short, medium, and long-term trends. The multi-timeframe objective of this indicator aims to avoid the pitfalls of other indicators. 


In This Article


  • What is the Ultimate Oscillator? 

  • How To Analyse Chart Using Ultimate Oscillator


Category 

Momentum 


Type 

Lagging 


What is the Ultimate Oscillator? 


The Ultimate Oscillator is a momentum oscillator that captures momentum across three different time frames. These include seven, 14, and 28 periods. The shorter timeframe has the most weight in the calculation, while the longer one has the least weight. Many momentum oscillators surge at the beginning of a strong advance, only to form a bearish divergence as the advance continues. It is because they are struck with one timeframe. This momentum oscillator aims to correct this fault by incorporating longer timeframes into the basic formula. Due to its multi-timeframe construction, the Ultimate Oscillator generates fewer divergence signals than other momentum oscillators. 



How To Analyse Chart Using Ultimate Oscillator


Buy and sell signals in a chart with this momentum oscillator are generated through divergences. Here’s how you can find buy and sell signals. 


Buy Signal 


It occurs when there is a bullish divergence. That is, a security’s price makes a lower low that isn’t confirmed by a lower low in the Oscillator. The low of the bullish divergence is below 30 in this case. After that, the Oscillator rises above the highest point reached during the bullish divergence. 


Sell Signal 


For a sell signal to occur, a bearish divergence must form. It is when a price makes a higher high, but the indicator is at a lower high. Besides, the first high of the divergence must be above 70. It means that the divergence started from an overbought territory and is likely to result in a downside price reversal. In addition, the Ultimate Oscillator must fall below the divergence low. The latter is the low point between the two highs of the divergence. 





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