Usually oscillators compare the smoothened price of a financial tool and its value n periods ago. Larry Williams once noticed that the efficiency of such oscillator can vary and depends on the number of single periods you take for the calculation. So he created the Ultimate Oscillator that uses a weighted total of three oscillators with different calculation periods.
Larry Williams first described the oscillator in 1985 in the "Technical Analysis of Stocks and Commodities" magazine. The values of the indicator vary in a range from zero to 100 and the center is the 50 value. Values below 30 correspond with the overbought zone, and values between 70 and 100 - with the oversold zone.The oscillator uses three time periods that you can set manually. On default, they are equal to 7, 14 and 28 bars. Mind that longer periods comprise shorter ones. That means that 28-period values discount 14-period and 7-period values. Therefore, we use the values of the shortest period three times, so these values influence the result of the oscillator most of all.
Larry Williams recommended that you should open a position when a divergence appears.
Author: MetaQuotes Software Corp.
Ultimate Oscillator Technical Indicator