Oscillators

Oscillators are a set of tools required for signal generation in the turns price trends within a trend and the trend itself. Since the oscillators are also closely linked concepts of oversold and overbought market. If the price in this case is at its upper limit and its further growth is unlikely in this case we say that the market is overbought. At the heart of the oscillators are formulas that use the input data, prices and trading volume. The parameters of these formulas, strongly affect the accuracy of forecasts, so they can be configured so that they give the most accurate forecasts.

In addition, for a correct interpretation of any signal of an oscillator, it is important to use in the practice of a certain set of rules.
As a rule, more accurate oscillator signals to generate a non-trend areas of the market, at a time when the schedule varies in price channel. But we do not say categorically that the oscillators can not be used for developing trends. It is worth taking into account mainly the signals in the direction of the trend, ie on its upstream areas, which serve as a signal for opening long positions.
We would also like to warn that trade against the trend, not the best option, because of the short step, which in turn reduces future profits, and also increases the risk.
On strongly growing trend is certainly small-sized faults, which can also be used oscillators, and perhaps they will give good signals. Taking into account these arguments, we conclude that the oscillators in trending segments of the graphs to be used for prolonged periods, in order to predict the most suitable time to complete the transaction, but only in the direction of the trend.

Regarding the use of oscillators, built on a signal line, is taken into account only those signals that do not contradict the dominant direction of prices. Other crossing the signal line will be less important signals to enter position. Overbought and oversold levels indicate that the change in price at a given time is made quickly enough, but it tells us that the price may be adjusted. In addition, the schedule of the oscillator is characterized by over-achievement zone before the end of trends, if at the beginning of the trend price changes significantly. Sam oscillator can be kept in a critical range for a long time, as the subsequent development trends. In this case, it appears that the most accurate signal is generated at the time, when the oscillator makes a number of oscillations in the critical range, and then leaves it.

The most efficient oscillator signals can be attributed divergence (divergence). Determined by the signal, at a time when the price chart creates a new peak, which is higher than the previous one, while the oscillator is a new peak not confirmed. As a rule, the height of divergence (divergence), has no effect on the strength of future price changes. In addition, these time-tested tools such as trendlines, support and resistance levels give excellent results and graphs of oscillators. No less efficiency brings the construction of moving averages on the charts oscillators. The principle of working with them is the same as that in the analysis of the standard chart.

In one of the best oscillators are such as:

- Oscillator point (in transfer momentum)
- MACD (Histogram)
- Price Oscillator (with English. Price Oscillator).
- The rate of change (with English. Oscillator ROC)
- Relative Strength Index (with English. Reduce RSI)
- The stochastic oscillator (with English. Stochastics Oscillator).
- Oscillator Williams% R.

From the point of view of technical analysis, an indicator of the oscillator can be used to predict possible trends in volatility of the market growth. A growth rate of the market determines the price movement.
The system of construction of all oscillators is similar, therefore we discuss only the most important ones.

Oscillator time (momentum) - the most common and easiest to use an oscillator. But it is worth noting that any signal of the oscillator signal should be confirmed yet any methods. Being created on the basis of the price difference after a set period of time. For example, if we want to calculate the weekly oscillator time, we will have to take away from the price within the specified time point, the price of one week ago. Based on the foregoing, the values of oscillator time is greater than 0 indicate a positive trend, while values ​​less than 0, say the negative.

In this case, the signals will be two factors:
Changing trend of the oscillator time usually indicates a weakening of the main price trends, and the intersection of the oscillator zero border, according to the change of trend.

On the downside of this oscillator can be counted at the beginning of the rapid changes in the calculation of very different prices listed above, and with their withdrawal from the calculation.

The principle of operation of the stochastic oscillator (with English Stochastic Oscillator), sootnoshaet current closing price with the price range for the selected time interval. The indicator contains two main lines. The first and main line is called% K. The second line is called% D, it is a moving average of% K. Often the% K is constructed by a solid line and the% D is represented by a dotted line.

In the Stochastic Oscillator are 3 common methods of its interpretation:
1) and sell when the oscillator is initially rises above the set level (80), and then falls below it. Purchases are made on the deal, if either% K or% D oscillator, initially fall below the specified level (about 20), and then rise above it.
2) Buy when the% K line crosses the line from the bottom up% D, and open short positions when the% K line crosses down the line% D.
3) It is important to watch for divergences. For example, prices can form several consecutive maxima, while Stochastic Oscillator can not grow higher than its previous highs.


Calculation. To calculate the stochastic oscillator, we need four variables:

1) Period% K, are the number of time periods and used to calculate the stochastics.
2) The periods of slow% K, are of the determinants of the internal state of the line% K. A value of 1, comes from the stochastic oscillator, while a value of 3, gives the slowest.
3) The periods of% D, are the number of time periods and used to calculate the moving average of% K. Direct
4) Method% D, is a method of smoothing (smooth or weighted, exponential, simple), which is used to calculate% D.

The oscillators are widely popular among traders - forecasters because they are easy to configure and easy to use. But keep in mind that they are primarily created to test the functionality of other indicators. And do only occasionally used by traders to predict market prices.

The most important signals from the oscillators:

- Break the zero value of the oscillator.
- Fall or growth indicator of the oscillator
- The intersection of the signal line and the indicator.
- Finding the oscillator in the oversold or overbought.
 - Divergence, the divergence indicator values and prices.

Typically, the light oscillator manifests itself in a better price horizontal corridor. But in the case when the formation of a new trend direction, then the correct solution would be to go to trend indicators and their use as support or resistance levels.