what does the ultimate oscillator tell you 
the ultimate oscillator is a range bound indicator with a value that fluctuates between 0 and 100 levels below 30 are deemed to be oversold and levels above 70 are deemed to be overbought similar to the relative strength index rsi trading signals are generated when the price moves in the opposite direction as the indicator and they re based on a three step method larry williams developed the ultimate oscillator in 1976 and published it in stocks commodities magazine in 1985 1 with many momentum oscillators correlating too heavily to near term price movements williams developed the ultimate oscillator to incorporate multiple timeframes to smooth out the indicator s movements and provide a more reliable indicator of momentum with fewer false divergences false divergences are common in oscillators that only use one timeframe because the oscillator surges when the price surges the oscillator tends to fall forming a divergence even though the price may still be trending strongly even if the price continues to rise williams recommended a three step approach for the indicator to generate a buy signal williams created the same three step method for sell signals the ultimate oscillator vs the stochastic oscillatorthe ultimate oscillator has three lookback periods or timeframes the stochastic oscillator has only one the ultimate oscillator doesn t typically include a signal line although one could be added the stochastic does both indicators generate trade signals based on divergence but the signals will be different due to the different calculations the ultimate oscillator uses a three step method for trading divergence limitations of using the ultimate oscillatorthe three step trading method for the indicator may help eliminate some poor trades but it also eliminates many good ones divergence isn t present at all price reversal points and a reversal won t always occur from overbought or oversold territory waiting for the oscillator to move above the divergence high bullish divergence or below the divergence low bearish divergence could mean a poor entry point as the price may have already run significantly in the reversal direction as with all indicators the ultimate oscillator shouldn t be used in isolation but rather as part of a complete trading plan such a plan will typically include other forms of analysis such as price analysis other technical indicators and or fundamental analysis 