Ultimate Oscillator with Envelopes is a trend following trading system which gives breakout trades in the favor of the major trend. This trading system gives a buy and sell signal at the beginning of the trend and traders can ride the entire trend.
Taking entry once a trend has started can be very difficult for traders. Also trading Breakout without confirmation of trend can be a non-profitable trading strategy.
This trading system removes the above two difficulties and gives a breakout entry at beginning of a trend. Let’s try to see how this system works with various examples.
Ultimate Oscillator with Envelopes Overview
Ultimate Oscillator is a banded oscillator value of which fluctuates between 0 and 100. Its calculated by combining the short-term, medium-term, and long-term momentum, and then this value is plotted on a single panel below the price.
This indicator gives better signals as compared to other oscillators which depend on a single time frame momentum calculation.
When the value of the Ultimate oscillator moves above 50 that means bulls are in control and when the value moves below 50 that means prices are in a bear trend. Further 70 and 30 levels are used in this indicator for confirmed breakout trades.
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Ultimate Oscillator with Envelopes Explanation
The second indicator of this trading system is Envelopes which plots the upper and lower band on a 45-period exponential moving average. This indicator is also trend following indicator and used as confirmation for taking the trades.
When price moves above the envelopes and the value of the Ultimate oscillator moves above 50 traders should look for long trades’.When price moves below the envelopes and the value of the ultimate oscillator moves below 50 then traders should look for short trades in the market.
Ultimate Oscillator: Buy Conditions
- Fresh Upside breakout from Envelopes.
- The ultimate oscillator should give a breakout from 70.
- Traders can hold the trade till the time price trades above the Envelopes.
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Ultimate Oscillator: Sell conditions
- A fresh breakdown from Envelopes.
- The ultimate oscillator should give a breakdown from 30.
- Traders can hold the trade till the time price trades below the Envelopes.