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Ultimate Oscillator
Description
Oscillators typically compare a security's (smoothed) price with its
price x-periods ago. Larry Williams notes that the value of this
type of oscillator can vary greatly depending on the number of time
periods used during the calculation. Thus, he developed the Ultimate
Oscillator that uses weighted sums of three oscillators, each of
which uses a different time period.
The three oscillators are based on Williams' definitions of buying
and selling "pressure".
Interpretation
Williams recommends that you trade following a divergence
and a breakout in the Ultimate Oscillator's trend.
A bullish divergence occurs when the security's price makes a lower
low that is not confirmed by a lower low in the Oscillator. A
bearish divergence occurs when the security's price makes a higher
high that is not confirmed by a higher high in the Oscillator.
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