Ultimate Oscillator From Scratch
Hi, traders!
Oscillators are very important part of any trading strategy. It helps to find the momentum and gives rather reliable signals in conjunction with other indicators. Today we’ll speak about one of the most powerful oscillators – Ultimate Oscillator.
Ultimate Oscillator uses the weighted average of three different timeframes and has less volatility and fewer trade signals compared to other oscillators that rely on a single timeframe. Buy and sell signals are generated following divergences. The Ultimately Oscillator generates fewer divergence signals than other oscillators due to its multi-timeframe construction. By using the weighted average of three different timeframes the indicator has less volatility and fewer trade signals compared to other oscillators that rely on a single timeframe. Buy and sell signals are generated following divergences. The Ultimately Oscillator generates fewer divergence signals than other oscillators due to its multi-timeframe construction.
How to Calculate the Ultimate Oscillator
-Calculate the Buying Pressure (BP) which is the close price of the period less the low of that period or prior close, whichever is lower. Record these values for each period as they will be summed up over the last seven, 14, and 28 periods to create BP Sum.
-Calculate the True Range (TR) which is the current period's high or the prior close, whichever is higher, minus the lowest value of the current period's low or the prior close. Record these values for each period as they will be summed up over the last seven, 14, and 28 periods to create TR Sum.
-Calculate Average7, 14, and 28 using the BP and TR Sums calculations from steps one and two. For example, the Average7 BP Sum is the calculated BP values added together for the last seven periods.
-Calculate the Ultimate Oscillator using the Average7, 14, and 28 values. Average7 has a weight of four, Average14 has a weight of two, and Average28 has a weight of one. Sum the weights in the denominator (in this case, the sum is seven, or 4+2+1).
-Multiply by 100 when other calculations are complete.
UO=[4+2+1(A7×4)+(A14×2)+A28]×100
UO=Ultimate Oscillator
How to use it?
In order for the indicator to generate a buy signal, it's recommended a three-step approach.
-First, a bullish divergence must form. This is when the price makes a lower low but the indicator is at a higher low.
-Second, the first low in the divergence (the lower one) must have been below 30. This means the divergence started from oversold territory and is more likely to result in an upside price reversal.
-Third, the Ultimate oscillator must rise above the divergence high. The divergence high is the high point between the two lows of the divergence.
Three-step method for sell signals.
-First, a bearish divergence must form. This is when the price makes a higher high but the indicator is at a lower high.
-Second, the first high in the divergence (the higher one) must be above 70. This means the divergence started from overbought territory and is more likely to result in a downside price reversal.
-Third, the Ultimate oscillator must drop below the divergence low. The divergence low is the low point between the two highs of the divergence.
Oscillators are very important part of any trading strategy. It helps to find the momentum and gives rather reliable signals in conjunction with other indicators. Today we’ll speak about one of the most powerful oscillators – Ultimate Oscillator.
Ultimate Oscillator uses the weighted average of three different timeframes and has less volatility and fewer trade signals compared to other oscillators that rely on a single timeframe. Buy and sell signals are generated following divergences. The Ultimately Oscillator generates fewer divergence signals than other oscillators due to its multi-timeframe construction. By using the weighted average of three different timeframes the indicator has less volatility and fewer trade signals compared to other oscillators that rely on a single timeframe. Buy and sell signals are generated following divergences. The Ultimately Oscillator generates fewer divergence signals than other oscillators due to its multi-timeframe construction.
How to Calculate the Ultimate Oscillator
-Calculate the Buying Pressure (BP) which is the close price of the period less the low of that period or prior close, whichever is lower. Record these values for each period as they will be summed up over the last seven, 14, and 28 periods to create BP Sum.
-Calculate the True Range (TR) which is the current period's high or the prior close, whichever is higher, minus the lowest value of the current period's low or the prior close. Record these values for each period as they will be summed up over the last seven, 14, and 28 periods to create TR Sum.
-Calculate Average7, 14, and 28 using the BP and TR Sums calculations from steps one and two. For example, the Average7 BP Sum is the calculated BP values added together for the last seven periods.
-Calculate the Ultimate Oscillator using the Average7, 14, and 28 values. Average7 has a weight of four, Average14 has a weight of two, and Average28 has a weight of one. Sum the weights in the denominator (in this case, the sum is seven, or 4+2+1).
-Multiply by 100 when other calculations are complete.
UO=[4+2+1(A7×4)+(A14×2)+A28]×100
UO=Ultimate Oscillator
How to use it?
In order for the indicator to generate a buy signal, it's recommended a three-step approach.
-First, a bullish divergence must form. This is when the price makes a lower low but the indicator is at a higher low.
-Second, the first low in the divergence (the lower one) must have been below 30. This means the divergence started from oversold territory and is more likely to result in an upside price reversal.
-Third, the Ultimate oscillator must rise above the divergence high. The divergence high is the high point between the two lows of the divergence.
Three-step method for sell signals.
-First, a bearish divergence must form. This is when the price makes a higher high but the indicator is at a lower high.
-Second, the first high in the divergence (the higher one) must be above 70. This means the divergence started from overbought territory and is more likely to result in a downside price reversal.
-Third, the Ultimate oscillator must drop below the divergence low. The divergence low is the low point between the two highs of the divergence.
Get access to private PineScript strategies and turn script alerts into orders at your exchange account with easy-to-set up bots
Get free alert bot:
skyrexio.com
Get free alert bot:
skyrexio.com
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.