The Ultimate Oscillator, developed by Larry Williams, compares an instrument?s price with its price xperiods ago. Because Williams noted that the value of this type of oscillator can vary greatly depending on the number of time periods utilized in the calculation, he assigned to this oscillator a single line that generates weighted sums of three oscillators, each using a different bar length.

Williams singled out divergences between the Ultimate Oscillator and the instrument's price activity in addition to a breakout in the trend of the oscillator values as the most significant action signals. A buy signal occurs with a bullish divergence, when the instrument?s price reaches a lower low that is not followed by a lower low in the oscillator. Conversely, when a market?s price reaches a higher high not followed by a higher high in the oscillator value, a bullish divergence occurs, setting a sell signal.

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