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Ultimate Oscillator

What is 'Ultimate Oscillator'

A technical indicator invented by Larry Williams that uses the weighted average of three different time periods to reduce the volatility and false transaction signals that are associated with many other indicators that mainly rely on a single time period.

Explaining 'Ultimate Oscillator'

This is a range-bound indicator, which means the value fluctuates between 0 and 100. Similar to the RSI, levels below 30 are deemed to be oversold, and levels above 70 are deemed to be overbought. Transaction signals are derived by finding situations where the price is going in opposite directions than the indicator. Once this divergence has been identified the trader will wait to confirm the transaction by using other technical indicators.

Ultimate Oscillator FAQ

Is RSI or stochastic better?

Relative strength index measures price movements speed, but the stochastic oscillator formula is optimal when the market is trading in consistent ranges. Generally, RSI is more useful in trending markets, and stochastics are more useful in sideways or choppy markets.

How do you use the Ultimate Oscillator indicator?

Wait for the bullish divergence in the market. This means, the price making a lower low, but the indicator should display a higher low. The first low in the divergence must be below the 30 levels on the indicator. The indicator must rise above the divergence high.

What is the best oscillator?

Generally, momentum oscillators with a fixed range are best for identifying overbought and oversold conditions. These include RSI, the Stochastic Oscillator and StochRSI. RSI and the Stochastic Oscillator fluctuate between zero and one hundred, while StochRSI fluctuates between zero and one.

Which indicator works best with RSI?

Relatively short-term moving average crossovers, such as the 5 EMA crossing over the 10 EMA, are best for complementing RSI. The 5 EMA crossing from above to below the 10 EMA confirms the RSI's indication of overbought conditions and possible trend reversal.

What is an oscillator in trading?

An oscillator is a technical analysis tool for constructing high and low bands between two extremes, and then builds a trend indicator that fluctuates within these bounds. Traders use it to discover short-term overbought or oversold conditions.

What is a good RSI number?

RSI is seen as overbought when above 70 and oversold when below 30. In an uptrend or bull market, the RSI tends to be between 40 to 90 with the 40-50 zone acting as support. During a downtrend or bear market, the RSI tends to stay between 10 to 60 with the 50-60 zone acting as resistance.

Further Reading


USING R FOR ANALYZING FINANCIAL MARKETS
search.proquest.com [PDF]
… or veteran investors with a special interest in financial market analysis and market economics … Divergences on the oscillators may confirm a reversal scenario … with proven technical techniques, Editura Wiley, New Jersey; ▪ Williams, L., 1985, The Ultimate Oscillator, Stocks & …

A financial investment assistantA financial investment assistant
ieeexplore.ieee.org [PDF]
… or veteran investors with a special interest in financial market analysis and market economics … Divergences on the oscillators may confirm a reversal scenario … with proven technical techniques, Editura Wiley, New Jersey; ▪ Williams, L., 1985, The Ultimate Oscillator, Stocks & …

Portfolio allocation using XCS experts in technical analysis, market conditions and options marketPortfolio allocation using XCS experts in technical analysis, market conditions and options market
dl.acm.org [PDF]
… or veteran investors with a special interest in financial market analysis and market economics … Divergences on the oscillators may confirm a reversal scenario … with proven technical techniques, Editura Wiley, New Jersey; ▪ Williams, L., 1985, The Ultimate Oscillator, Stocks & …

Technical analysis-based fuzzy support system for stock market tradingTechnical analysis-based fuzzy support system for stock market trading
www.inderscienceonline.com [PDF]
… or veteran investors with a special interest in financial market analysis and market economics … Divergences on the oscillators may confirm a reversal scenario … with proven technical techniques, Editura Wiley, New Jersey; ▪ Williams, L., 1985, The Ultimate Oscillator, Stocks & …

An exploratory analysis of the growth rates of economic and financial dataAn exploratory analysis of the growth rates of economic and financial data
www.sciencedirect.com [PDF]
… or veteran investors with a special interest in financial market analysis and market economics … Divergences on the oscillators may confirm a reversal scenario … with proven technical techniques, Editura Wiley, New Jersey; ▪ Williams, L., 1985, The Ultimate Oscillator, Stocks & …

Warning: physics envy may be hazardous to your wealth!Warning: physics envy may be hazardous to your wealth!
papers.ssrn.com [PDF]
… or veteran investors with a special interest in financial market analysis and market economics … Divergences on the oscillators may confirm a reversal scenario … with proven technical techniques, Editura Wiley, New Jersey; ▪ Williams, L., 1985, The Ultimate Oscillator, Stocks & …

A hybrid financial trading support system using multi-category classifiers and random forestA hybrid financial trading support system using multi-category classifiers and random forest
www.sciencedirect.com [PDF]
… or veteran investors with a special interest in financial market analysis and market economics … Divergences on the oscillators may confirm a reversal scenario … with proven technical techniques, Editura Wiley, New Jersey; ▪ Williams, L., 1985, The Ultimate Oscillator, Stocks & …



Q&A About Ultimate Oscillator


Can you provide an example showing how someone might trade off of divergence between price and UO ?

Sure! Let's say we're looking at Apple Inc (AAP

Why do you use these specific time frames for your calculations?

These particular time frames were chosen because they represent important turning points in stock market trends. They also allow for enough data to be gathered so as not to have too much volatility or false transaction signals.

What does range-bound mean?

Range-bound means that values fluctuate between 0 and 1.

Which of the following are examples of oscillators?

MACD, ROC, RSI, CCI.

When would you use this indicator over others like RSI or Stochastic oscillators ?

You would use this indicator when looking at stocks instead of indices or futures contracts because it was originally designed for individual stocks rather than groups of stocks .

How does the Ultimate Oscillator differ from other indicators?

The Ultimate Oscillator differs from other indicators because it uses a weighted average of three different time periods.

What is Ultimate Oscillator?

The Ultimate Oscillator is a technical indicator that uses the weighted average of three different time periods to reduce volatility and false transaction signals.

Where can you find transaction signals with this indicator?

Transaction signals can be found by identifying situations where price is going in opposite directions than what the UO indicates. Once this divergence has been identified, wait to confirm with other indicators before making any trades.

What are the three time periods used in the calculation of the Ultimate Oscillator?

The three time periods used in calculating the UO are 12, 26, and 9 days.

How does an oscillator differ from other indicators?

Oscillators tend to be used for short-term trading signals.

When should you avoid using this indicator altogether ?

You should avoid using this indicator altogether if there is no clear trend established on a chart .