In 1976, Larry Williams invented the Ultimate Oscillator. As you can see, this indicator has stood the test of time and is still with us today. It is also built into the IQ Option platform. Today is a great opportunity for me to introduce you to the construction and operation of this oscillator.
How does the Ultimate Oscillator work?
Many momentum oscillators are trapped in a single timeframe and so they accelerate sharply at the start of a strong rally and then form a bearish divergence as the rally continues. In opposition, the Ultimate Oscillator (UO) incorporates longer timeframes into its formula and the signals based on both, bullish and bearish divergences can be identified.
Adding the Ultimate Oscillator to the IQ Option chart
Log in to your trading account. Choose the chart type for a favoured asset. Then, click on the Indicators icon. You will find the Indicators tab there. Click on Momentum and select the Ultimate Oscillator from the list that has unfolded on the right side.
You can also type the name of the indicator needed in the search box.
The Ultimate Oscillator will be visible below the price chart in the separate window.
The UO takes three different timeframes in the calculations. It reduces false divergences. Signals to buy are based on a bullish divergence and to sell on a bearish divergence.
Trading with the Ultimate Oscillator
Opening long positions on IQ Option
To open a long position with the UO three things must happen. The first is a bullish divergence. It occurs when the oscillator creates a higher low but the price forms a lower low. The second thing is that the low of the Ultimate Oscillator should be placed below the line of value 30. And the third step is to wait for the oscillator to rise beyond the high of the divergence.
Opening short positions with the Ultimate Oscillator
There should be a bearish divergence observed between the oscillator and the price. The UO should form a lower high while the price creates a higher high. The oscillator high should be noted above the line of the value of 70. And the last thing is that Ultimate Oscillator should fall beneath the low of the bearish divergence. This will confirm an upcoming reversal.
Pros and Cons of Using the Ultimate Oscillator (UO)👍👎
- Combines three timeframes, reducing false signals 💡
- Identifies both bullish and bearish divergences 📈📉
- Works on various chart timeframes 🌐
- Customizable settings for different assets and market conditions 🔧
- May generate false signals in highly volatile markets ⚠️
- Requires additional technical analysis tools for confirmation 🔍
- Not as widely used as some other oscillators 📊
|Comparison between Oscillators||Ultimate Oscillator||RSI||Stochastic Oscillator|
|Timeframes||Combines three timeframes||Single timeframe||Single timeframe|
|False divergences||Reduced||More common||More common|
Getting more signals from Ultimate Oscillator
You can successfully use the Ultimate Oscillator on different timeframes. However, it might be a good idea to play with its settings. Some securities and stocks may not show oversold and overbought readings when the UO has default settings. By decreasing the timeframe to 4, 8, 16 you will increase the sensitivity of the oscillator and generate more trading signals at the same time. For securities that are characterised by high volatility, you should do the opposite that is to diminish sensitivity by lengthening the timeframes.
Which oscillator is best?
Oscillators are very popular among traders. In fact, it is difficult to choose the best one. First of all they work in a similar way and with identical settings they will give signals in similar places. Secondly, as always, as many users, as many opinions. I personally like the RSI and the Stochastic Oscillator. But I would put Ultimate Oscillator on a par with those indicators. It is just as good. I give an extra plus to Williams for giving the indicator a name, which certainly contributed in some way to its popularity.
It is possible to use the Ultimate Oscillator on intraday, daily, weekly or monthly charts. This indicator combines three timeframes and produces signals based on bearish and bullish divergences.
Change the default parameters depending on what kind of asset you are trading.
You can also get a confirmation of trading signals by using additionally chart patterns, extra indicators or other technical analysis tools available on the IQ Option platform.
Log in to your demo account to get to know the Ultimate Oscillator well. Here, you will not lose your money. After some practice shift to the live account to generate profits.
Best of luck!
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