Question 1

What is Ultimate Oscillator?

Accepted Answer

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.

Question 2

How it works

Accepted Answer

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.

Question 3

Key levels

Accepted Answer

- **Above 70** — Overbought zone - **Below 30** — Oversold zone - **50** — Neutral level

Question 4

Buy signals

Accepted Answer

- 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)

Question 5

Sell signals

Accepted Answer

- 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)

Question 6

Parameters

Accepted Answer

| 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 |

Question 7

Example conditions

Accepted Answer

| Condition | Meaning | |-----------|---------| | `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 |

Question 8

Understanding the Three Periods

Accepted Answer

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 pre

Question 9

Larry Williams' Trading Rules

Accepted Answer

The creator recommended specific rules for trading UO divergences:

Question 10

Bullish Divergence Setup

Accepted Answer

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

Question 11

Take Profit

Accepted Answer

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

Question 12

Tips

Accepted Answer

- 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