Oscillators

Oscillators are indicators that tend to fluctuate quasi-cyclically within a limited range. They are very popular among technical traders and appear in most charting packages. Entry models based on oscillators are endogenous in nature (they do not require anything but market data) and are fairly simple to implement, characteristics they share with breakout and moving-average models. However, breakout and moving-average models tend to enter the market late, often too late, because they are...

Kinds Of Oscillators

There are two main forms of oscillators. Linear band-pass filters are one form of oscillator. They may be analyzed for frequency (periodicity) and phase response. The MACD and MACD-H are of this class. Another form of oscillator places some aspect of price behavior into a normalized scale (the RSI, Stochastics, and belong to this class) unlike the first category, these oscillators are not linear filters with clearly defined phase and frequency behavior. Both types of oscillators highlight...

Generating Entries With Oscillators

There are many ways to generate entry signals using oscillators. In this chapter, three are discussed. One popular means of generating entry signals is to treat the oscillator as an overbought oversold indicator. A buy is signaled when the oscillator moves below some threshold, into oversold territory, and then crosses back above that threshold. A sell is signaled when the oscillator moves above another threshold, into overbought territory, and then crosses below that threshold. There are...