The Ultimate Oscillator

█ CONCEPTS

In his article, Ehlers states that indicators are essentially filters that remove unwanted noise (i.e., unnecessary information) from market data. Simply put, they process a series of data to place focus on specific information, providing a different perspective on price dynamics. Various filter types attenuate different periodic signals within the data. For instance, a lowpass filter allows only low-frequency signals, a highpass filter allows only high-frequency signals, and a bandpass filter allows signals within a specific frequency range.

Ehlers explains that the key to removing indicator lag is to combine filters of different types in such a way that the result preserves necessary, useful signals while minimizing delay (lag). His proposed UltimateOscillator aims to maintain responsiveness to a specific frequency range by measuring the difference between two highpass filters' outputs. The oscillator uses the following formula:

UO = (HP1 - HP2) / RMS

Where:
HP1 is the first highpass filter.
HP2 is another highpass filter that allows only shorter wavelengths than the critical period of HP1.
RMS is the root mean square of the highpass filter difference, used as a scaling factor to standardize the output.


The resulting oscillator is similar to a bandpass filter, because it emphasizes wavelengths between the critical periods of the two highpass filters. Ehlers' UO responds quickly to value changes in a series, providing a responsive view of momentum with little to no lag.


█ USAGE

Ehlers' UltimateOscillator sets the critical periods of its highpass filters using two parameters: BandEdge and Bandwidth:
The BandEdge sets the critical period of the second highpass filter, which determines the shortest wavelengths in the response.
The Bandwidth is a multiple of the BandEdge used for the critical period of the first highpass filter, which determines the longest wavelengths in the response. Ehlers suggests that a Bandwidth value of 2 works well for most applications. However, traders can use any value above or equal to 1.4.
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NinjaTrader: April 2025
In “The Ultimate Oscillator” in this issue, John Ehlers presents a no-lag oscillator. The indicator discussed in the article is available for download at the following link for NinjaTrader 8:

Once the file is downloaded, you can import the indicator into NinjaTrader 8 from within the control center by selecting Tools → Import → NinjaScript Add-On and then selecting the downloaded file for NinjaTrader 8.

You can review the indicator source code in NinjaTrader 8 by selecting the menu New → NinjaScript Editor → Indicators folder from within the control center window and selecting the file.