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The Ultimate Oscillator is a technical indicator developed by Larry Williams and is used mainly to gauge Overbought and Oversold periods of markets and price. It was first published at the Technical Analysis of Stocks and Commodities magazine. In this article you will learn how to use the Ultimate Oscillator in your trading and how to generate trading decisions using this technical indicator.

 Absolutely NO THINKING is needed, just buy when Blue and sell when Red!

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Download the Ultimate Oscillator for MetaTrader 4

Calculation
While its exact formula is complex and rather complicated, the main principle behind the indicator is comparing the Buying Pressure which is defined by Close minus the lowest point of the candle, to the True Range of any candle. The full formula can be found here.

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Interpretation
The Ultimate Oscillator is a oscillator whose purpose is to find periods of overbought and oversold in price. Readings above 70 are considered overbought while readings below 30 are considered oversold.

Crosses of these levels are used as trading signals: Cross of the 30 level from below will signal a long trade, while a cross of the 70 level from above will signal a short trade. Examples:

It is also applicable to trade the Ultimate Oscillator in a trend-following approach, entering long trades as the middle line (level of 50) is crossed from below and short trades as middle line is crossed from above. This method is much weaker and results in more losing trades.