by Helmut Schmidhofer
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I won't spend a lot of time on other oscillators, having found the one (NCO) that does everything I need.
However, it is important to know what other people see in the market. Your thinking is your own, but you must know to what degree it is contrary.
One of the most prominent is the Stochastic Oscillator developed by George C. Lane in the late 1950s. It is a momentum indicator that shows the location of the current close relative to the high/low range over a set number of periods. Closing levels that are consistently near the top of the range indicate accumulation (buying pressure) and those near the bottom of the range indicate distribution (selling pressure)
Stochastic calculations produce two lines, %K and %D which are used to indicate overbought/oversold areas of a chart. Divergence between the stochastic lines and the price action of the underlying instrument gives a powerful trading signal.
Another, the relative strength index, RSI, developed by J. Welles Wilder Jr., is a technical momentum indicator that compares the magnitude of recent gains to recent losses in an attempt to determine overbought and oversold conditions of an asset.
The Moving Average Convergence Divergence (MACD) involves plotting two momentum lines. The MACD line is the difference between two exponential moving averages and the signal or trigger line which is an exponential moving average of the difference. If the MACD and trigger lines cross, then this is taken as a signal that a change in trend is likely.
Dr. Elder cleverly named his first indicator "Elder-ray" by virtue of its function, which he says is similar to that of x-rays. "Bull Power" (Daily High less n-period moving average) and "Bear Power" (Daily Low less n-period moving average) compete. Long positions are taken when the Bear Power is below zero and there is a bullish divergence while Short positions are assumed when the Bull Power is above zero and there is a bearish divergence.
Oscillators are an essential group of indicators that futures, options, and stock traders have embraced to reveal turning points in flat markets.
They all have value. Their followers are revealed in the price action. All we have to know is which indicator triggered which price action, and whether the trigger was valid. Not easy. OK, speculate! Look at your indicators and take them on.
On to the next question - day trading (should be called intra-day trading).
Back to net-change oscillators Proceed to day trading
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