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2 Simple Ultimate Oscillator Trading Strategies

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Ultimate Oscillator Overview

Take a guess what type of indicator the ultimate oscillator is? That’s right, an oscillator.

It was created by none other than Larry Williams the king of oscillators. Larry is also known for the Williams %R and the Stochastics oscillators. To learn more about Larry and his other indicators, check out his Wikipedia page here.

The indicator was first released in 1976 and at the time, “ultimate” was a really catchy way to brand a new indicator. Remember at this time, Larry had already released a number of other indicators and he needed to make sure this one stood out.

How to Calculate the Ultimate Oscillator

The one immediate standout for the ultimate oscillator is that it factors in 3 input periods 7, 14 and 28. This is different from other oscillators that have one input period, for example, 14 that looks back over “x” range.

The indicator is centered around two key inputs – buying pressure and true range.

Ultimate Oscillator Formulas

[1]
Buying Pressure (BP) = Close – Min (Low or Previous Close)

True Range (TR) = Max (High or Previous Close) – Min (Low or Previous Close)

Average 7 Periods = Sum of BP over the last  7 periods / Sum of TR over the last 7 periods
Average 14 Periods  = Sum of BP over the last 14 periods / Sum of TR over the past 14 periods
Average 28 Periods = Sum of BP over the last 28 periods / Sum of TR over the past 28 periods

Ultimate Oscillator = 100 * [(4 * Average 7 Periods) + (2 * Average 14 Periods) + Average 28 Periods] / (4 + 2 + 1)

What is Buying Pressure?

The buying pressure is all about seeing how well a stock closes relative to its current low and the previous low. This lets you know if there is any buying interest in the security. If the close is near the low point of both the current and previous period, then that’s an indication there is little to no buying pressure.

What is the True Range?

The true range measures the high to low range of the current high or prior close to the current low or prior close. [2]

How is the Ultimate Oscillator Plotted?

The indicator oscillates between 0 and 100. When the indicator is said to have a high reading over 70 and a low reading below 30.

Ultimate oscillator

Above is a 5-minute chart and you can see the clear overbought and oversold readings on the chart. Seems simple enough right?

Just buy when the indicator is below 30 and sell when the indicator is over 70? Wrong.

Since we know this is a bad idea, let’s walk through 2 strategies you can test out.

Strategy #1 – Exploit the Divergence

Let’s first start with how to use the indicator with trending markets. This is where oscillators have the toughest time forecasting market direction.

A stock could give a sell signal as the indicator goes well above 70, but this does not mean the stock is going to roll over immediately. A stock can remain in an overbought state for an extended period of time.

Overbought Stays Overbought

Overbought Stays Overbought

This is where oscillators can really get you in trouble. An overbought stock can stay just that – overbought. Now in defense of the ultimate oscillator, you are going to face this reality regardless of your oscillator of choice. It’s just the nature of the beast.

The reason is that a stock can oscillate from overbought to the midline around 50 indefinitely. This is great if you are long and riding the trend higher.

However, if you are short, it can lead to the death of a thousand cuts as the stock drags higher, slowly draining your account value.

This can also play out on the downside as well. If you step out front and catch a falling knife, it can just continue lower and if you are long it’s not a good feeling.

The Setup

So, how do you use the oscillator when the stock is trending hard? Simple, you don’t assume just because the ultimate oscillator is above 70 you should go out there and start shorting.

So, instead of just selling because the stock is overbought on the oscillator, use it as an opportunity to see if you can jump on board with the trend.

Divergence is About Timing

It’s going to feel counterintuitive, but if a stock makes a high and then breaches that high again, it could be ripe for a breakout trade. The problem is that the ultimate oscillator may have a lower reading on the break of the recent high.

All of the experts will tell you that you should sell the divergence, but it’s not that simple. While divergence is in play, who knows when the divergence will lead to a selloff.

Therefore, you could try buying the break and then using a stop management system to protect yourself and then ride the wave higher. Even in the example above, there was a clear divergence but the stock nevertheless climbed higher.

Defy Divergence

Defy Divergence

Remember It’s About Timing

Again, please do not read this and say divergence means buy or sell. You have to size up the trade. But what I am saying is that if a divergence presents itself, it does not mean it is going to instantly playout in the market. The divergence could be a result of the fact the first move was so strong, it reflects a significant change in trend that is not meant to be exceeded by the indicator on the short-term.

Strategy #2 – Buy or Sell the Panic

One of the hardest things to do is to buy the panic. I don’t have the right mindset to jump out in front of the train, but if you do it can prove valuable.

It’s rather simple, you are buying as everyone is panic selling and once the panic selling subsides, the stock will make some sort of run higher.

This does not mean it will exceed the days high if you are day trading, but it does mean you are likely to see a move.

The Setup

One strategy you can use when trading with the ultimate oscillator is to identify a panic selling point at support. You want to see a spike down in the ultimate oscillator to extreme levels. It’s not enough for the oscillator to hit 45. You need to see it tank.

Then wait for the stock to reclaim the level. You then buy the break back into that level and place your stop below the recent low.

The stop is critical because if the stock rolls over and goes lower, you have to take your lumps in order to live to fight another day.

Chart Example

Here is a chart example of the stock VRAY. The stock was in a clear trading range for 5 days before having a panic selloff on the sixth day. This panic selling quickly subsided and the stock was able to regain the prior support level. Guess what happened next?

That’s right, the stock stabilized and moved higher. Ultimately the next day the stock shot up in a parabolic fashion

Buy the Panic

Buy the Panic

In Summary

While the name may make you feel it’s beyond reproach, the ultimate oscillator is just like any other indicator. It has its strengths and weaknesses. As you can see from this article we took a different approach rather than reciting the same strategies repeated over and over again on the internet. It doesn’t mean those can’t work but in trading, you will need to find an edge.

It’s not enough to just sell divergence or place a buy order just because the indicator goes below 30. You have to be smarter than that and you are.

How Can Tradingsim Help?

Interested in exploring the ultimate oscillator further but need a place to test your ideas? You can use Tradingsim to practice trading with the indicator using real tick data for the past 2 years.

You can test the strategies detailed in this article as well as make up your own.

External References

  1. Bhandari, Bramesh. (2017). Trading the Ultimate Oscillator. futuresmag.com
  2. True Range and How it Differs From Rangemacrooption.com

The post 2 Simple Ultimate Oscillator Trading Strategies appeared first on – Tradingsim.



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Tuesday Market Workshop – Portfolio Protection Part 5 – Don’t Get Excited

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Don't get excited!  

The Futures are up another 3.5% this morning, pre-market as China reports NO new cases of the virus and Trump touts his "miracle cure" that people have already died from taking.  Day after day, the salesman turned president has encouraged coronavirus patients to try hydroxychloroquine with all of the enthusiasm of a real estate developer. The passing reference he makes to the possible dangers is usually overwhelmed by the full-throated endorsement. “What do you have to lose?” he asked five times on Sunday. 

As it turns out, the real question is "What does Donald Trump have to gain?"  If hydroxychloroquine becomes an accepted treatment, several pharmaceutical companies stand to profit, including shareholders and senior executives with connections to the President.  Trump himself has a small personal financial interest in Sanofi (SNY), the French drugmaker that makes Plaquenil, the brand-name version of hydroxychloroquine.   

"Some associates of Mr. Trump's have financial interests in the issue. Sanofi's largest shareholders include Fisher Asset Management, the mutual fund company run by Ken Fisher, a major donor to Republicans, including Mr. Trump," said the report. "Another investor in both Sanofi and Mylan, another pharmaceutical firm, is Invesco, the fund previously run by Wilbur Ross, the commerce secretary. As of last year, Mr. Trump reported that his three family trusts each had investments in a Dodge & Cox mutual fund, whose largest holding was in Sanofi."

While China may have gone a day with no new cases of COVID-19, the US blasted up from 337,933 cases yesterday morning (4 times more than China, which has 5 times more people than the US does) to 368,449 (up 9%) this morning and we now have 10,943 deaths – the third highest count in the World behind Italy (16,523) and Spain (13,798), which are both openly considered disasters (and they got hit hard with infections 3 weeks before we did – so we may just be lagging on deaths as we have double their infections).  

How does America have 4 times more virus cases than China (1.44Bn people) and India (1.4Bn people) combined with 1/10th the combined population?  According to Donald Trump, it is Obama's fault.  Italy and Spain say it's…
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Bitcoin Profit – A Review

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Many platforms exist these days online that allow auto-trading of cryptocurrencies, however, it isn’t always easy to know which ones can be relied on to be trustworthy and safe.

Bitcoin Profit is one software option claiming to make users money by automatically trading cryptocurrencies at the best possible time with a high win-rate of up to 92%. The Bitcoin bot uses a complex algorithm capable of detecting market trends. While an experienced trader is able to use trading signals to execute profitable trades, this software completes the process on your behalf so it’s perfect for complete novices

So, what do you need to know about the Bitcoin Profit platform? Read on and find out more

An Overview Of Bitcoin Profit

Bitcoin Profit is a form of auto-trading software that claims to be capable of operating more rapidly by 0.01 seconds than the average types of trading signals software. Designed by John Mayers, this platform sends signals on daily functions and trends just like other types of automatic trading platform but it claims that users can earn at least $1300 in profits each day. This is probably an over-estimate, particularly if you’re a novice trader, but nevertheless, many users do report good profits.

Fees, Withdrawals And Deposits

Withdrawals can be made from this platform at any time, with processing taking place within 24 hours. This favourably compares with a lot of other similar bots which can take up to 10 days to process withdrawals. The platform will only retain 1% of profits for each user, and no other commissions or fees need to be paid.

When it comes to customer support, users won’t be disappointed. The service team are helpful and knowledgeable and are available 24/7 via live chat and email.

Trading With Bitcoin Profit – The Benefits

So, should you trade with Bitcoin Profit? There are many features to bear in mind when making your choice:

  • The platform is intuitive and user-friendly
  • A high success rate on trades
  • Low deposits at just $250
  • Demo accounts are available that allow new traders to discover the best ways to successfully use the platform
  • Tips and tutorials are available on the platform for beginners
  • There is a responsive and dedicated customer support team that can be accessed via live chat and email

Is Bitcoin Profit Right For Me?

Should you try the Bitcoin Profit platform? If you’re interested in trying out an automated crypto trading system that enables you to make a profit from the volatile cryptocurrency market without any personal effort or research necessary, you could well find that this software is right for you. It’s especially useful for novices in the trading sector who want to enjoy a convenient solution, and while some trading bots can’t be relied upon, this one is a reputable choice. Although no trading system will ever be entirely foolproof, if you adopt a sensible strategy for money management you should find this platform gives you the best opportunity to make a profit with minimal effort.

 

The post Bitcoin Profit – A Review appeared first on Wall Street Survivor.



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The IPOX® Week, April 06, 2020

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  • IPOX Indexes mixed as declines in IPOX U.S. outweighs strength in IPOX Europe, IPOX Nordic & IPOX China.
  • IPOX International (ETF: FPXI) heavyweight Riyadh-traded Saudi Aramco (ARAMCO AB) extends post-inclusion gains.
  • IPO Deal-flow Review & Outlook: April starts with two U.S. IPOs as Zentalis (ZNTL US) soars on debut. Slow month ahead amid coronavirus disruption.

IPOX Indexes mixed as weak IPOX U.S. outweighs strength in IPOX Europe and IPOX China. Amid Covid-19 driving continued strength in the U.S. Dollar & U.S. Bonds, while U.S. equity risk sank (VIX: -28.59%), the IPOX Strategies finished the week mixed. While U.S. equities succumbed to the big weakness in U.S. small-caps (RTY: -7.06%) anew post mid-week, markets abroad fared significantly better, led by the IPOX Nordic, IPOX Europe and IPOX China, driving the relative performance differential of the IPOX International (ETF:FPXI) vs. the International Market to a massive +1531 bps. YTD in IPOX’s favor. Amid no earnings visibility resulting in reducing multiples for growth stocks, e.g., the impact of liquidation-selling in secondary and tertiary equity positions was highlighted by the week’s return distribution in the IPOX 100 U.S. (ETF: FPX). Here, 70/100 holdings fell on the week, with the average (median) equally weighted position declining by -5.86% (-6.28%) a massive -299 (-341) bps. lower than when compared to the applied market-weighted IPOX 100 U.S. (ETF: FPXI), with the ESG-compliant IPOX ESG version (IPXT) faring even better. On a global

IPOX® International Investing (ETF: FPXI) since Fund launch:

level, this helped to push the market neutral IPOX Global Alts/Corporate Action strategy to a fresh all-time high, gaining +2.38% to +26.47% YTD last week. In individual exposure, we note the big performance jump in IPOX International (ETF: FPXI) heavyweight Riyadh-traded global energy behemoth Saudi Aramco (ARAMCO AB: +5.85%). With the “FPXI” ETF being the only ETF available to U.S. investors carrying significant weight, the company extended its two week-gain since portfolio inclusion to +9.52%. This helped to compensate for the significant losses in select small- and mid-caps held in the portfolio, including Chinese coffee chain Luckin Coffee (LK US: -79.01%), Brazilian payment processor StoneCo (STNE US: -27.09%) and Chinese application software maker GSX Techedu (GSX US: -21.91%). We also note the big relative strength in the Nordic-traded portion of the “FPXI” portfolio, with online casino software application maker Evolution Gaming (EVO SS: +12.51%), (EVO SS: +12.51%), cloud communications software Sinch (SINCH SS: +11.66%) and telecom IPO M&A Tele2 (TEL2B SS: +9.13%) leading the way.

Select IPOX® Indexes Price Returns (%) Last Week 2019 2020 YTD
IPOX® Indexes: Global/International
IPOX® Global (IPGL50) (USD) -2.57 27.93 -15.28
IPOX® Global Alternative (USD) 2.38 -1.96 26.47
IPOX® International (IPXI)* (USD) (ETF: FPXI) -2.75 31.37 -11.96
IPOX® Indexes: United States
IPOX® Composite U.S. (USD) -3.22 24.64 -21.57
IPOX® 100 U.S. (IPXO)* (USD) (ETF: FPX) -2.87 29.60 -25.19
IPOX® ESG (IPXT) (USD) -1.37
IPOX® Indexes: Europe/Nordic
IPOX® 30 Europe (IXTE) (EUR) 0.61 34.55 -9.21
IPOX® Nordic (IPND) 2.62 38.52 -14.41
IPOX® 100 Europe (IPOE)* (USD) -2.30 30.97 -18.65
IPOX® Indexes: Asia-Pacific/China
IPOX® Asia-Pacific (IPTA) (USD) -4.27 4.41 -17.56
IPOX® China (CNI) (USD) -0.30 26.31 -4.62
IPOX® Japan (IPJP)** (JPY) -4.61 37.91 -26.65

* Basis for ETFs: FPX US, FPX LN, FPXE US, FPXU FP, FPXI US, TCIP110 IT and CME-traded e-mini IPOX® 100 U.S. Futures (IPOM0). Source: Bloomberg L.P. & Refinitiv/Thomson Reuters.

IT’S THE NEW GENERATION: CME Group announces launch of 0.25 tick IPOX 100 U.S. Index Futures (Front month: IPOM0). Whether you are a risk manager or speculator, CME Group (CME US: +1.43%) – the world’s largest exchange operator – now offers investors efficient and cost effective access to the IPOX 100 U.S. (ETF: FPX) via emini IPOX 100 U.S. Index Futures (Front month: IPOM0). Contact info@ipox.com for further info and free resources.

IPO Deal-flow Review & Outlook: April starts with two U.S. IPOs as Zentalis (ZNTL US) soars on debut. Slow month ahead amid coronavirus disruption. Only 2 firms commenced trading across the global regions last week with the average equally-weighted deal adding +12.17% based on the difference between the final IPO offering price and Friday’s close. Chinese AR-advertising platform WiMi Hologram (WIMI US: -4.55%) fell on below-target offering whereas the New York-based cancer biotech Zentalis Pharmaceuticals (ZNTL US: +28.89%) surprised the market with its high-end and upsized IPO. As the COVID-19 pandemic deepens, April is set for a slow start with only one biotech (Keros Therapeutics [(KROS US)]) scheduled. Other IPO News include: 1) Thailands’s largest energy company PTT Oil & Retail Business (PTTOR) filed for another $1B+ IPO offer; and 2) COVID-19 vaccine maker Immunomic Therapeutics mulls IPO.

The post The IPOX® Week, April 06, 2020 appeared first on Low Cost Stock & Options Trading | Advanced Online Stock Trading | Lightspeed |.



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