Ultimate Oscillator (7, 14, 28)

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Ultimate Oscillator (7, 14, 28)

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Ultimate Oscillator (UO) is a range-bound indicator with a value between 0 and 100. Levels below 30 are deemed to be oversold, and levels above 70 are deemed to be overbought.

UO measures momentum across multiple timeframes.  It’s an indication of buying pressure. When buying pressure is strong, the UO rises and when buying pressure is weak, the UO falls.

Trading signals are generated when the price moves in the opposite direction as the indicator.

By using the weighted average of three different timeframes, the indicator has less volatility and fewer trade signals compared to other indicators that rely on a single timeframe.

Calculation:

  • Buying Pressure – Calculate the Buying Pressure by subtracting the lesser of the low or prior close from the close for the period.
  • True Range – Calculate the True Range by subtracting the lesser of the low or prior close from the higher of the high or prior close for the period.
  • Averages – For 7-, 14-, and 28-day periods, calculate the ratio of Buying Pressure to True Range.
  • Ultimate Oscillator – Create a weighted average of the three averages to generate the Ultimate Oscillator value.