✔️ Information reviewed and updated in April 2024 by Eduardo López
We know that having a trading method is essential to earn money on a recurring basis through the financial markets, so It is essential to take the time necessary to build a trading strategy that gives us confidence and results when trading.
Before starting to design our strategy or method, it is necessary to answer certain questions such as what type of investors we are, in what period we want to operate, what kind of trading we want to execute and what are the most common price oscillators. Today we will share with you one of the most important concepts when wanting to enter this financial world.
What is the price oscillator?
Price oscillators are one of the most used tools in technical analysis that is responsible for studying how they are related in the market when it is immersed in a lateral trend.And it is usually defined as the graphic expression of the difference between two sets of data that are responsible for representing the force and speed with which the price of a certain security moves.
Unlike tracking indicators, oscillators are characterized by:
- Be early indicators, which means that they give warning signs.
- They do not always give signals so they can lose movements.
- Those RSI or Stochastic type oscillators work very well in anti-trend periods, however, they can fail in directional markets where they often give premature signals.
- The most widely used oscillators are the RSI, STK, CCI, Ultimate, William% R, among others.
- The usual oscillators are the RSI, CCI, STK, Momentum and ROC, this is because they are early indicators which means that they anticipate chart signals, but in trend values they regularly give premature signals so they tend to be more useful in lateral phases.
Top 3 Oscillators You Should Implement
Force Index
This oscillator was created by Alexander Elder and some of the elements used to calculate it are price and volume.It is not complicated and it turns out to be very efficient.
Stochastic
Created by George Lane, this oscillator is very similar to Force Index. It's not that sensitive, but It detects situations of oversold and overbought very well.And according to Lane it follows the speed or momentum of the price.
RSI
It is also known as the Relative Strength Index, and it is responsible for showing the strength of the price by comparing individual movements when there is a rise or fall of those successive closing prices.Like the stochastic, the value of the indicator moves between 0 and 100, with their respective levels, visually indicating when the price is cheap or expensive.
Using the price oscillators will give you the support you were looking for, since they will alert you, confirm and predict all the price movements that occur in the market, in addition to Its signals will serve as tools that will detect divergences and possibilities regarding trends.
