The UFO is a hybrid of two powerful oscillators - the (UO) and the Index ( )
Features of the UFO include:
- Optional divergence lines drawn directly onto the oscillator in realtime.
- Configurable alerts to notify you when divergences occur, as well as centerline crossovers.
- Configurable lookback periods to fine tune the divergences drawn in order to suit different trading styles and timeframes.
- Background colouring option to indicate when the oscillator has crossed its centerline.
- Alternate timeframe feature allows you to configure the oscillator to use data from a different timeframe than the chart it is loaded on.
- 2x MTF triple-timeframe overbought and oversold confluence signals painted at the top of the panel for use as a confluence for reversal entry trades.
The core calculations of the UFO+ combine the factory settings of the and Index, taking an average of their combined values for its output eg:
UO_Value + MFI_Value / 2
The result is a powerful oscillator capable of detecting high quality divergences, including on very low timeframes and highly volatile markets, it benefits from the higher weighting of the most recent price action provided by the Ultimate Oscillators calculations, as well as the calculation of the , which incorporates data. The UFO and its incorporated 2x triple-timeframe MTF overbought and oversold signals makes it well adapted for low timeframe scalping and regular divergence trades in particular.
Tradingview describes the as follows:
“The indicator (UO) is a tool used to measure momentum across three varying timeframes. The problem with many momentum oscillators is that after a rapid advance or decline in price, they can form false divergence trading signals. For example, after a rapid rise in price, a divergence signal may present itself, however price continues to rise. The attempts to correct this by using multiple timeframes in its calculation as opposed to just one timeframe which is what is used in most other momentum oscillators.”
You can read more about the UO and its calculations here
The Index ( )
Investopedia describes the as follows:
“The Index ( ) is a technical oscillator that uses price and data for identifying overbought or oversold signals in an asset. It can also be used to spot divergences which warn of a trend change in price. The oscillator moves between 0 and 100. Unlike conventional oscillators such as the ( ), the Index incorporates both price and data, as opposed to just price. For this reason, some analysts call the volume-weighted .”
You can read more about the and its calculations here
The (relating to the built-in MTF feature)
The popular oscillator has been described as follows:
“The is an indicator used in that ranges between zero and one (or zero and 100 on some charting platforms) and is created by applying the oscillator formula to a set of ( ) values rather than to standard price data. Using values within the formula gives traders an idea of whether the current value is overbought or oversold. The oscillator was developed to take advantage of both momentum indicators in order to create a more sensitive indicator that is attuned to a specific security's historical performance rather than a generalized analysis of price change.”
You can read more about the and its calculations here
How do traders use overbought and oversold levels in their trading?
The oversold level, that is when the is above the 80 level is typically interpreted as being 'overbought', and below the 20 level is typically considered 'oversold'. Traders will often use the at an overbought level as a confluence for entry into a short position, and the at an oversold level as a confluence for an entry into a long position. These levels do not mean that price will necessarily reverse at those levels in a reliable way, however. This is why this version of the employs the triple timeframe overbought and oversold confluence, in an attempt to add a more confluence and reliability to this usage of the .
What are divergences?
Divergence is when the price of an asset is moving in the opposite direction of a technical indicator, such as an oscillator, or is moving contrary to other data. Divergence warns that the current price trend may be weakening, and in some cases may lead to the price changing direction.
There are 4 main types of divergence, which are split into 2 categories;
regular divergences and hidden divergences. Regular divergences indicate possible trend reversals, and hidden divergences indicate possible trend continuation.
Regular divergence: An indication of a potential trend reversal, from the current downtrend, to an uptrend.
Regular divergence: An indication of a potential trend reversal, from the current uptrend, to a downtrend.
Hidden divergence: An indication of a potential uptrend continuation.
Hidden divergence: An indication of a potential downtrend continuation.
How do traders use divergences in their trading?
A divergence is considered a leading indicator in , meaning it has the ability to indicate a potential price move in the short term future.
Hidden and hidden divergences, which indicate a potential continuation of the current trend are sometimes considered a good place for traders to begin, since trend continuation occurs more frequently than reversals, or trend changes.
When trading regular divergences and regular divergences, which are indications of a trend reversal, the probability of it doing so may increase when these occur at a strong support or . A common mistake new traders make is to get into a regular divergence trade too early, assuming it will immediately reverse, but these can continue to form for some time before the trend eventually changes, by using forms of support or resistance as an added confluence, such as when price reaches a moving average, the success rate when trading these patterns may increase.
Typically, traders will manually draw lines across the swing highs and swing lows of both the price chart and the oscillator to see whether they appear to present a divergence, this indicator will draw them for you, quickly and clearly, and can notify you when they occur.
With this indicator you can set alerts to notify you when any/all of the above types of divergences occur, on any chart timeframe you choose.
You can adjust the default lookback values to suit your prefered trading style and timeframe. If you like to trade a shorter time frame, lowering the default lookback values will make the divergences drawn more sensitive to short term price action.
Disclaimer: This script includes code from the stock UO and by Tradingview as well as the Divergence for Many Indicators v4 by LonesomeTheBlue.
- Added a an option for users to select where the MTF Stoch RSI Triple timeframe signal are positioned, Top, Bottom, or Absolute. Default set to Top.
- Adjusted the default secondary set of MTF triple-timeframe confluences to use 15m + 30m + 120m timeframes by default.
- Differentiated the colors of MTF#1 from MTF#2 for Stoch RSI overbought / oversold signals.
- Updated the chart image.
- Defaulted the Range bands to disabled.
- Reorganised the settings menu to place the common settings at the top.
- Added optional text label to panel to notify when either MTF CCI or MTF Stoch RSI reach overbought or oversold. Disabled by default.
- Adjusted the default MTF signal position to be 'Absolute' which places the MTF signals at the bottom of the panel, clear away from the oscillator itself.
- Added optional bar/candle coloring option for the MTF signals. Disabled by default.
- Enabled the centerline by default.
- Disabled the 'Fadeout oscillator' Feature by default.
- Fixed the text label shown when osc is in 'Flip oscillator' mode, or optionally when MTF Stoch RSI / CCI confluences are met.
- Enabled the highlight overbought and oversold highlight on oscillator by default.
- Removed the centerline crossover alerts.
- Named and grouped alerts together more clearly.
- Improved the centerline crossunder back ground colour and oscillator colour settings, and default colours.
- Added a global control to show / hide MTF ribbon signals
- Added an option to include the current timeframe overbought and oversold Stoch RSI signals into the irron, disabled by default.
- Reorganised settings menu.
Ganz im Spirit von TradingView hat der Autor dieses Skripts es als Open-Source veröffentlicht, damit Trader es besser verstehen und überprüfen können. Herzlichen Glückwunsch an den Autor! Sie können es kostenlos verwenden, aber die Wiederverwendung dieses Codes in einer Veröffentlichung unterliegt den Hausregeln. Sie können es als Favoriten auswählen, um es in einem Chart zu verwenden.
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