Ultimate Oscillator

The Ultimate Oscillator is a multi-timeframe momentum indicator developed by Larry Williams. It combines short, medium, and long-term price momentum into a single value, reducing the number of false divergence signals. It ranges from 0 to 100.

The Ultimate Oscillator calculates buying pressure across three periods and weights them:

BP = Close - Min(Low, Previous Close)
TR = Max(High, Previous Close) - Min(Low, Previous Close)
Avg1 = Sum(BP, period1) / Sum(TR, period1)
Avg2 = Sum(BP, period2) / Sum(TR, period2)
Avg3 = Sum(BP, period3) / Sum(TR, period3)
UO = ((Avg1 * 4) + (Avg2 * 2) + (Avg3 * 1)) / 7 * 100

Shorter periods receive higher weights.

• Above 70 — Overbought zone
• Below 30 — Oversold zone
• 50 — Neutral level

Buy signals

• Bullish divergence: price makes lower low, UO makes higher low
• UO drops below 30, then rises above the divergence high
• Divergence low is below 30 (confirms oversold condition)

Sell signals

• Bearish divergence: price makes higher high, UO makes lower high
• UO rises above 70, then falls below the divergence low
• Divergence high is above 70 (confirms overbought condition)

| Parameter | Default | Description | |-----------|---------|-------------| | Period 1 | 7 | Short-term buying pressure period | | Period 2 | 14 | Medium-term buying pressure period | | Period 3 | 28 | Long-term buying pressure period |

| Condition | Meaning | |-----------|---------| | ULTIMATE(7,14,28) < 30 | Oversold territory | | ULTIMATE(7,14,28) > 70 | Overbought territory | | ULTIMATE(7,14,28) cross_over 30 | Exiting oversold zone | | ULTIMATE(7,14,28) cross_under 70 | Exiting overbought zone |

The default periods (7, 14, 28) follow a doubling pattern:

| Period | Timeframe Focus | Weight | Contribution | |--------|----------------|--------|-------------| | 7 (short) | ~1 week | 4 | 57% — dominates the reading | | 14 (medium) | ~2 weeks | 2 | 29% — secondary influence | | 28 (long) | ~1 month | 1 | 14% — baseline stability |

This weighting means UO is primarily driven by short-term momentum but smoothed by the longer periods. If all three periods agree (all showing buying or selling pressure), the signal is strongest.

The creator recommended specific rules for trading UO divergences:

Bullish Divergence Setup

1. UO makes a higher low while price makes a lower low
2. First UO low must be below 30 (confirms oversold)
3. Buy when UO rises above the high between the two lows
4. Place stop-loss below the recent price low

Take Profit

• Exit when UO reaches 70+ (overbought)
• Or exit when UO reaches 50 if the setup was weak

• The multi-timeframe approach reduces false signals compared to single-period oscillators
• Larry Williams recommended using it primarily with divergence signals
• The weight ratio (4:2:1) ensures short-term momentum dominates
• Works best on daily charts for position trading
• Combine with trend analysis — trade divergence signals only in the direction of the larger trend