Hello professor. I am very thankful to all the professor who delivered the treasure of knowledge every week. This week, the professor @utsavsaxena has given us lecture about the "Ultimate Oscillator Indicator". At the end of the lecture, he has asked some questions, i am going to answer those question. Let start the homework task.
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What do you understand by ultimate oscillator indicator. How to calculate ultimate oscillator value for a particular candle or time frame. Give real example using chart pattern, show complete calculation with accurate result.
Trading and the crypto world is getting popularity very rapidly and the number of the investors is increasing day by day. There are a lot of the investors in the market who perform the trading on the daily base and buy and sell the coin. But we cannot place the buy and sell orders blindly. Proper research and analysis is require to safe from risk and to trade with high profit. The traders use the strategies and indicators to analyze the market. Today, we will discuss the "ULTIMATE OSCILLATOR" Indicator
The Ultimate Oscillator indicator was introduced in 1976 by the Larry Williams. This is the technical indicator which is use to measure the momentum. But the uniqueness and the effectiveness of this indicator is that, this indicator use the value of the different time frames and then produce the signals.
The different time frames are use in the Ultimate oscillator because of which, this indicator is less volatile and more accurate. This indicator produce the signals to determine the market rend, trend reversal and to get the best entry and exit spots.
This indicator is use the divergence of the price. These divergence can either be bullish or bearish. The indicator identify the divergence and thus helps the traders to identify whether the market will rise up or fall down next.
The traders get the signals earlier because of the divergence and then take the trading decisions. This is the best prediction indicator because it use the 3 different time frame value.
The ultimate oscillator indicator also give the reversal signals by identifying the market is in overbought region or oversold region. This indicator has 0 to 100 levels between which, the price oscillate. The indicator move upward or downward with the movement of the price. When the indicator range below the 30, the market is in oversold region. The sellers are in pressure in the oversold region.
When the indicator range above 70, the market is in overbought region. The buyers are in pressure in the overbought region. By identifying the overbought or oversold region, the traders can enter or exit from the market at the best spots to earn the profit and to safe from lose. The overbought is best to place the buy order. The overbought region is best to enter into the market Because the price is expected to rise up after the overbought region.
The oversold is best to place the buy order. The oversold region is best to exit from the market because the price is expected to fall after the oversold region.
Advantages of the Ultimate Oscillator Indicator
- Use to identify trend
- Use to identify whether the market is in overbought region or oversold region
- Use to get more accurate and true signals
- Use to measure momentum using the different time frames value.
How the Ultimate Oscillator is Calculated
we can use the general formula,
UO=(((A7 * 4)+(A14 * 2)+(A28))/7)*100
- The UO is the ultimate indicator
- A7 is the average computed by using the value of the seven period.
- A14 is the average computed by using the value of the 14 periods
- A28 is the average computed by using the value of the 28 periods
- Buying pressure or BP = (Current Close) – Min(Previous Close or Current Low)
- True range or TR = Max(Current High or Previous Close) – Min(Previous Close or Current Low)
- A7 = (Sum of BP for the past 7 days / Sum of TR for the past 7 days
- A14 = ( Sum of BP for the past 14 days / Sum of TR for the past 14 days
- A28 = (Sum of BP for the past 28 days / Sum of TR for the past 28 days)
Below is the chart of Luna/USDT where we have the three different time period.
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| periods | buying pressure | True range |
|---|---|---|
| 1 | 0.30 | 0.40 |
| 2 | 0.21 | 0.50 |
| 3 | 0.10 | 0.60 |
| 4 | 0.22 | 0.70 |
| 5 | 0.10 | 0.20 |
| 6 | 0.10 | |
| 7 | 0.1 | 0.63 |
| 8 | 0.80 | 0.68 |
| 9 | 0.70 | 0.99 |
| 10 | 0.24 | 0.41 |
| 11 | 0.75 | 0.92 |
| 12 | 0.25 | 0.77 |
| 13 | 0.50 | 0.40 |
| 14 | 0.22 | 0.73 |
| 15 | 0.55 | 0.75 |
| 16 | 0.60 | 0.70 |
| 17 | 0.52 | 0.52 |
| 18 | 0.70 | 0.87 |
| 19 | 0.53 | 0.73 |
| 20 | 0.42 | |
| 21 | 0.75 | |
| 22 | 0.35 | 0.48 |
| 23 | 0.58 | 0.93 |
| 24 | 1 | 1.13 |
| 25 | 1.1 | |
| 26 | 0.60 | 0.70 |
| 27 | 0.47 | 0.75 |
| 28 | 0.50 | 0.88 |
A7 = 1.1 / 3.63 = 0.3
A14 = 5.59/8.53 = 0.65
A14 = 13.78/19.25 = 0.71
Now Put the A&, A14 and A28 in the formula.
- UO=(((A7 * 4)+(A14 * 2)+(A28))/7)*100
- UO = (((0.3*4) + (0.65 * 2) + (0.71))/7)100
- UO = (1.2+1.3+0.71)/7 *100
- UP = 3.2/7
- UO = 0.46*100
- UO = 46
46 id close to 48 which mean our collection is right.
Question - How to identify trends in the market using ultimate oscillator. What is the difference between ultimate oscillator and slow stochastic oscillator.
- Trend Identification
The Ultimate oscillator can be use to identify the market trend. here are basically two trend in the market; bullish trend and bearish trend. By identifying the trend, the traders can trade more effectively and successfully.
Identifying the trend using the ultimate oscillator indicator is very simple and easy. When the ultimate indicator's reading is range below the 30 levels, the market is in oversold region. The market enter into the oversold region because of the high selling pressure. When the market is in oversold region, the selling pressure is high and market is in downtrend.
When the market price is high in uptrend and indicator is in range above the 70 levels, the sellers enter into the market and sell their coins to earn the profit. The selling pressure increase. The demand decrease and supply get high because of the demand and supply law where the demand and supply are inversely proportional to each other.
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The price also decrease because price is directly proportional to the demand. When demand decrease, the price also decrease. The indicator reading get below to the 30 levels and market at that time, is said to be in downtrend. The downtrend occur when the indicator is below the 30 levels.
The indicator reading get above the 70 levels and market at that time, is said to be in uptrend. The uptrend occur when the market is above the 70 level.
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- Slow stochastic indicator
This is also a momentum based technical indicator which is use to measure the momentum using just the value of single time frame. This indicator use only one time frame, that's why it is less accurate and usually produce the false signals. This indicator also help to identify the market trend. Here the indicator move between the 0-100 level. When the indicator is below the 20 levels, the market is in over sold region. When indicator is above the 80 levels, the market is in overbought region.
| Ultimate oscillator | slow-stochastic |
|---|---|
| Use to measure momentum using the value of three time frames which are 7 period, 14 period and 28 | Use to measure momentum using just 1 time frame value which is 14 period. |
| Use more values of the time frames for calculation and produce the less number of signals. | Use plenty of signals among which, most are the false |
| The market is in overbought when indicator reading is above 70 and oversold when indicator reading is below 30 . | The market is in overbought when indicator reading is above 70 and oversold when indicator reading is below 30 |
| More effective, efficient and accuracy is high | Less efficient and mostly produce false signals. |
| Has only one Oscillating line on chart. | Has two lines which oscillate and move with price. |
Question 3- How to identify divergence in the market using ultimate oscillator, if we are unable to identify divergence easily than which indicator will help us to identify divergence in the market.
Divergence
The divergence is the condition where the price of the coin move in a certain direction but the indicator move in opposite direction. The direction of movement of price and indicator is different in the divergence. For example when the price move upward and indicator show the downward movement, the divergence occur. Similaly, if the price move downward direction but the indicator show the upward movements, the divergence occur.
The divergence give us earlier signal about the upcoming market trend. The traders can utilize these signals to take the important trading decisions and can earn more profit.
Bullish Divergence
The Bullish divergence occur when the price of the asset move downward direction but the ultimate indicator move in upward direction at the same time. The coin's price usually rise rapidly after the bullish divergence. This divergence give us signals that the trend will reverse into the bullish trend and price will rise. SO this produce the signals to buy the coins. The traders should enter into the market at the bullish divergence. The traders take the advantage of this opportunity and enter into the market. The buying pressure increase and coin rise up.
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Bearish divergence
The Bearish divergence occur when the price of the asset move upward direction but the ultimate indicator move in downward direction at the same time. The coin's price usually decline rapidly after the bearish divergence. This divergence give us signals that the trend will reverse into the bearish trend and price will decline. So this produce the signals to sell the coins. The traders should exit from the market at the bearish divergence. The traders take the advantage of this opportunity and exit from the market. The selling pressure increase and coin fall downward.
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if we are unable to identify divergence easily using the ultimate stochastic oscillator, then we can use any other indicator to identify the divergence. There are a lot of the indicators like RSI, Stochastic oscillator, etc.
What is the 3 step- approach method through which one can take entry and exit from the market. Show real example of entry and exit from the market.
Below are the three steps to take entry into the market using the Ultimate Stochastic Oscillator.
Buy trade
- First of all, the traders need to identify the the Bullish divergence. The bullish divergence is the point when the price is moving downward but the ultimate oscillator show the upward movement. This indicate that the price will rise up next.
- In the next step, the traders should make it confirm that the price is below the 30 level at the ultimate indicator reading. This indicate that there is oversold region. The price is continuously dropping and the indicator is continuously moving upward.
- At the end and final steps, the Ultimate oscillator indicator should move above the divergence high. This is the point between the two low of the divergence.
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Sell trade
- First of all, the traders need to identify the the Bearish divergence. The bearish divergence is the point when the price is moving upward but the ultimate oscillator show the downward movement. This indicate that the price will decline next.
- In the next step, the traders should make it confirm that the price is above the 70 level at the ultimate indicator reading. This indicate that there is overbought region. The price is continuously rising and the indicator is continuously dropping downward.
- At the end and final steps, the Ultimate oscillator indicator should move below the divergence low. This is the point between the two high of the divergence
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What is your opinion about ultimate oscillator indicator. Which time frame will you prefer how to use ultimate oscillator and why?
The Ultimate oscillator indicator is very helpful and useful to analyze the market because it produce very accurate signals. It is technical indicator which is use different time frames value to measure the momentum. The different time frames are use in the Ultimate oscillator because of which, this indicator is less volatile and more accurate. This indicator is use the divergence of the price.
These divergence can either be bullish or bearish. The indicator identify the divergence and thus helps the traders to identify whether the market will rise up or fall down next. This indicator produce the signals to determine the market rend, trend reversal and to get the best entry and exit spots.
The ultimate oscillator indicator also give the reversal signals by identifying the market is in overbought region or oversold region. By identifying the overbought or oversold region, the traders can enter or exit from the market at the best spots to earn the profit and to safe from lose.
This indicator work more effectively when we combine some other indicator along with this indicator. Its effectivity and the accuracy get more enhanced. There are a lot of indicator which we can combine with this indicator like sic oscillator, RSI, etc.
If we talk about the best time frame for the ultimate stochastic oscillator, then i will prefer the scalpers. They can use the ultimate indicator to identify the signals in smaller time frames. Not just scalpers, but also the swing traders can use this to get the signals for their trading planning and strategies. This indicator use the value of three different time frames so best for the long and short time frames trading. In smaller time frames, this indicator produced multiple signals.
Conclusion
Multiple indicators and strategies are being use in crypto world for analysis purpose. We have studied today about a technical indicator which is use to measure the momentum based on three different time frames. This indicator produce less but more accurate and authentic signals. This is use to identify trend, trend reversal, divergence and also identify whether the market is in overbought region or oversold region.
We can combine this indicator along with any other indicator for more best and accurate results.