25 juni 2021 2:44

Ultieme oscillator

Wat is de ultieme oscillator?

De Ultimate Oscillator is een technische indicator die in 1976 door Larry Williams is ontwikkeld om het koersmomentum van een actief over meerdere tijdframes te meten. Door het gewogen gemiddelde van drie verschillende tijdsbestekken te gebruiken, heeft de indicator minder volatiliteit en minder handelssignalen in vergelijking met andere oscillatoren die op één tijdsbestek vertrouwen. Koop- en verkoopsignalen worden gegenereerd als gevolg van verschillen. De uiteindelijke oscillator genereert minder divergentiesignalen dan andere oscillatoren vanwege de constructie met meerdere tijdframes.

Belangrijkste leerpunten

  • De indicator gebruikt drie tijdframes bij de berekening: zeven, 14 en 28 perioden.
  • Het kortere tijdsbestek weegt het meeste mee in de berekening, terwijl het langere tijdsbestek het minste gewicht heeft.
  • Koopsignalen treden op als er bullish divergentie is, de divergentie laag is onder de 30 op de indicator en de oscillator stijgt dan boven de divergentie high.
  • Een verkoopsignaal treedt op wanneer er een bearish divergentie is, de divergentie hoog boven de 70 ligt en de oscillator dan onder de divergentie laag valt.

De formule voor de ultieme oscillator is:

How to Calculate the Ultimate Oscillator

  1. 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.
  2. 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.
  3. 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.
  4. 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.

What Does the Ultimate Oscillator Tell You?

The Ultimate Oscillator is a range-bound indicator with a value that fluctuates between 0 and 100. Similar to the Relative Strength Index (RSI), levels below 30 are deemed to be oversold, and levels above 70 are deemed to be overbought. Trading signals are generated when the price moves in the opposite direction as the indicator, and are based on a three-step method.

Larry Williams developed the Ultimate Oscillator in 1976 and published it in Stocks & Commodities Magazine in 1985. With many momentum oscillators correlating too heavily to near-term price movements, Williams developed the Ultimate Oscillator to incorporate multiple timeframes to smooth out the indicator’s movements and provide a more reliable indicator of momentum, with fewer false divergences.

False divergences are common in oscillators that only use one timeframe, because when the price surges the oscillator surges. Even if the price continues to rise the oscillator tends to fall forming a divergence even though the price may still be trending strongly.

In order for the indicator to generate a buy signal, Williams 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.

Williams created the same 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.

The Difference Between the Ultimate Oscillator and Stochastic Oscillator

The Ultimate Oscillator has three lookback periods or timeframes. The Stochastic Oscillator has only one. The Ultimate Oscillator doesn’t typically include a signal line (one could be added), while the Stochastic does. While both indicators generate trade signals based on divergence, the signals will be different due to the different calculations. Also, the Ultimate Oscillator uses a three-step method for trading divergence.

Limitations of Using the Ultimate Oscillator

While the three-step trading method for the indicator may help eliminate some poor trades, it also eliminates many good ones. Divergence is not present at all price reversal points. Also, a reversal won’t always occur from overbought or oversold territory. Also, waiting for the oscillator to move above the divergence high (bullish divergence) or below the divergence low (bearish divergence) could mean poor entry point as the price may have already run significantly in the reversal direction.

As with all indicators, the Ultimate Oscillator shouldn’t be used in isolation, but rather as part of a complete trading plan. Such a plan will typically include other forms of analysis such as price analysis, other technical indicators, and/or fundamental analysis.

 

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