The Ultimate Stochastic oscillator combines the earliness of a stochastic oscillator whilst removing noisy variation via a process inducing less lag than using pre or post-smoothing.
Various information can be obtained from the interpretation of the Ultimate Stochastic Oscillator. The most basic usage makes use of the colors between the oscillator and its signal line to determine the current price trend, with a red color indicating a downtrend and green color indicating an uptrend trend.
The oscillator also displays one overbought (in red) and oversold (in green) area indicating when the market is overbought or oversold. This can indicate potential trend reversals.
The Ultimate Stochastic oscillator makes it easier to spot divergences with the price compared to the regular stochastic due to the preservation of certain price variations.