Description

• Developed by Larry Williams in 1985, UO combines three different time frames to make a single oscillator for giving confirmations of reversals
• UO oscillates between 0 to 100 levels, where 50 stands for centerline or neutral zone
• It compares price of stock with price x-period ago and gives weights to different time frames

Interpretation

• Reading above 70, is considered as overbought stock and below 30 is considered as oversold stock
• UO cutting level 70 in the downward direction is used for taking short trades
• UO cutting level 30 in the direction is used for taking long trades
• Divergence with stock price is also the reason for its usage for analysis

Default Parameters Used/Inputs

• High Line
• Low Line
• Close Line
• Bars 1
• Bars 2
• Bars 3

Returns/Output

Ultimate Oscillator values of stock for the specified period.

Formula

UO = (RUO / 7 ) * 100
RUO = 4 * (BPSum1 / TRSum1) + 2 * (BPSum2 / TRSum2) + (BPSum3 / TRSum3)
Where
Buying Pressure (BP) BP = Today's close - Today's TL
True Low(TL) = the lower of today’s low or yesterday’s close
True Range (TR) = the greater of Today's High - Today's Low or Today's High - Yesterday's Close or Yesterday's Close - Today's Low
Calculate BPSum1, BPSum2, and BPSum3 by adding up the entire BPs for each of the three specified time frames
Calculate TRSum1, TRSum2, and TRSum3 by adding up all of the TR's for each of the three specified time frames