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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. |
