Advanced Tools Plug-in:

ULT - Ultimate Oscillator Indicator

This is another indicator offered up by Mr. Larry Williams. No one can fault Mr. Williams for his contribution to the industry; he has proven himself on numerous occasions as truly one of this industry’s best traders.

The ULT indicator seems to be another modification of the RSI indicator, as is his %R indicator. Laying the three indicators on the chart, you can’t help but see the similarities. The advantage of the ULT indicator is that the trader is given two additional variables in the formula to modify and fine tune the action and reaction to the market price.

This indicator, as with the RSI indicator, works on an overbought and oversold region. Mr. Williams states that the upper threshold should start at 70% and the lower threshold starts at 30%, but depending on the market, the volatility, and the settings, you may need to adjust the thresholds to either higher or lower settings to obtain signals.

Once the ULT line crosses above the upper threshold into the overbought region, it is time to anticipate a reversal in price and lower prices to ensue. When the ULT line crosses below the lower threshold, it is time to anticipate a reversal in price and anticipate prices to rise once again.

Many traders like to also use a 50% line to confirm price action. Once the ULT line crosses the 50% line, this is a confirmation of the overall trend.

Watch the Ultimate Oscillator Indicator Video

Calculate Today’s “True Low (TL)”. TL = the lower of today’s low or yesterday’s close.

Calculate Today’s “Buying Pressure (BP)”. BP = Today’s close - Today’s TL.

Calculate Today’s “True Range (TR)”.

TR = the higher of

1. Today’s High - Today’s Low;
2. Today’s High - Yesterday’s Close;
3. Yesterday’s Close - Today’s Low.

Calculate BPSum1, BPSum2, and BPSum3 by adding up all of the 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.

The Raw Ultimate Oscillator (RawUO) is equal to:

4 * (BPSum1 / TRSum1) + 2 * (BPSum2 / TRSum2) + (BPSum3 / TRSum3)

The Final Ultimate Oscillator is equal to:

( RawUO / (4 + 2 + 1) ) * 100

Buy/Sell Signals

Buy signals are generated when the ULT line crosses below the lower threshold into the oversold region, then re-enters the center channel signaling that the market has reversed and an uptrend is about to ensue.

Sell signals are generated when the ULT line crosses above the upper threshold into the overbought region, then re-enters the center channel signaling that the market has reversed and a downtrend is about to ensue.