![]() It works the same way in bearish direction, or when trading price oscillator divergence. Then you should trade until you get an opposite signal from the price oscillator indicator, or until the price action tells you otherwise. You should trade this setup in the bullish direction, placing a stop at the other side of the pattern. If the pattern is confirmed, you will have a strong bullish signal from both indicators. At the same time, the bearish price action creates a reversal candle pattern. Suddenly, the PO indicator creates a bullish crossover at the zero line. This means that we will take into consideration only crosses of the zero line supported by a candle pattern in the same direction. One method for using the price oscillator indicator is by combining it with candlestick patterns. #1 – Price Oscillator + Candlestick Patterns ![]() Now that you are pretty familiar with the structure of the PO indicator, we will discuss three trading strategies. 3 Strategies Using the Price Oscillator Technical Indicator The bearish divergence works the same way, but in the opposite direction. As you see, the price then reverses and enters a bullish trend, which is even sharper. This confirms the presence of the bullish divergence on the chart. At the same time, the price oscillator indicator line is making higher bottoms. See that the price is following a strict bearish trend. Price Oscillator Charting ExampleĪbove you see a classical example of a bullish divergence between the PO indicator and the price action. Depending on the traders stop loss strategy, at a minimum this situation will cause a number of false signals and losing trades. To the detriment of the trader, the range will provide resistance at the $25 level and the stock will once again head lower. For example, if a stock is trading within a range of $20 – $25 dollars, as the stock approaches $25, the shorter moving average will often close above the longer average due to the upward move in price. Traders can find themselves in serious trouble with the price oscillator indicator when the market is choppy. Remember, that crosses in the moving averages will generate buy and sell signals, so in trending markets, there are few signals triggered, which allows a trader to maximize their gains, by riding the stock for big profits. PositivesĪs stated above, the price oscillator is a trend following indicator, so naturally the indicator works best in trending markets. This generally works better in choppy markets, as the moving averages are not permitted to trend due to a range bound market. Another method is to fade the signals and go in the opposite direction. Since the indicator is a trend following system, majority of traders follow a very simple rule of buying when the shorter average crosses above the longer average and conversely when the shorter average crosses below the longer average a sell signal is triggered. There are numerous trading methods for the price oscillator. (Shorter Moving Average – Longer Moving Average) To plot the price oscillator indicator in terms of percentages use the below formula: ![]() Shorter Moving Average – Longer Moving Average To plot the price oscillator indicator in terms of points use the below formula: (2) The price oscillator indicator can be expressed in terms of percentages, so buy and sell signals can be generated as the price oscillator shifts from positive and negative territories. ![]() (1) The trader can define any two input parameters for the periods of the moving averages, while the MACD is always 12 and 26. This technical indicator is very similar to the MACD, but there are two main differences. The price oscillator indicator displays the difference of two moving averages in either points or in percentages. Which is the Best Price Oscillator Strategy?.#3 – Price Oscillator + Volume Indicator.#1 – Price Oscillator + Candlestick Patterns.3 Strategies Using the Price Oscillator Technical Indicator. ![]()
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