images/contents.gifimages/index.gifimages/prev1.gifimages/next1.gif

Oscillators

The program enables you to plot nine kinds of oscillator studies:

images/aspen00090000.gif Momentum

images/aspen00090000.gif Acceleration

images/aspen00090000.gif Moving average momentum

images/aspen00090000.gif Moving average oscillator

images/aspen00090000.gif Moving average convergence divergence (MACD)

images/aspen00090000.gif MACD oscillator

images/aspen00090000.gif Accumulation distribution (A/D) oscillator

images/aspen00090000.gif High/low oscillator

images/aspen00090000.gif Directional movement oscillator

images/aspen00090000.gif Volume Accumulation Oscillator

An oscillator is a conventional study--that is, an oscillator is not plotted on top of a bar chart. Oscillators are commonly used to identify overbought and oversold conditions, and trend reversals. According to John J. Murphy, there are three situations in which an oscillator is useful (see, Murphy, John J., Technical Analysis of the Futures Markets, A Comprehensive Guide to Trading Methods and Applications, New York: New York Institute of Finance, A Prentice Hall Company, 1986.):

1. When its value reaches an extreme reading near the upper or lower end of its boundary, indicating overbought and oversold conditions, respectively.

2. When divergence occurs between the oscillator and the price action and while oscillator is in an extreme position.

3. When the oscillator crosses the zero line, signaling the direction of a price trend.

The following sections explain the oscillator studies available in the program.