Williams Ultimate Oscillator

The Williams Ultimate Oscillator is a time-based price evolution oscillator developed by Larry Williams.

It uses the weighted sum of three oscillators, each with a different time period: the first for the short term, the second for the medium term and the third for the long term. The Ultimate Oscillator varies between 0 and 100.

Larry Williams suggests using the following three time periods: 7 days for the short term, 14 days for the medium term and 28 days for the long term.

Calculation Method

1. For the short term period, we calculate the average of the "Buying Pressure", which is the difference between the closing price of the day and the minimum of the low of the day and the low of the previous day.
2. We similarly calculate the averages of the "Buying Pressure" for the medium and long term periods.
3. Each average so calculated is divided by the average of the "True Range" over the same period.
4. Finally, we perform the weighted average of the three obtained ratios. The ratio corresponding to the short term is weighted by 4, that of the medium term by 2, and that of the long term by 1.

Example

Interpretation

Williams recommends taking a position at each divergence and at each trend reversal of the Ultimate Oscillator:

Buy "long" when:

1. A bullish divergence occurs. That is, when the price reaches a new low not confirmed by a new low of the oscillator.
2. During the bullish divergence, the oscillator drops below 30.
3. The oscillator then rises above the highest point reached during the bullish divergence phase. This is the moment at which one can buy "long".

Sell "long" when:

• The conditions to sell "short" are met (explained below), or
• The Ultimate Oscillator rises above 50 then falls below 45, or
• The Ultimate Oscillator rises above 70.

Sell "short" when:

1. A bearish divergence occurs. That is, when the price reaches a new high not confirmed by a new high of the oscillator.
2. During the bearish divergence, the oscillator rises above 50.
3. The oscillator then falls below the lowest point reached during the bearish divergence phase. This is the moment at which one can sell "short"

Buy "short" when:

• The conditions to buy "long" are met (explained above), or
• The Ultimate Oscillator rises above 65, or
• The Ultimate Oscillator falls below 30.