Investor Sentiment It must be said that the root of all trading is being aware of the market sentiment, which guides the future direction of prices. Regardless of where you think prices “should” go based on any available research, they will only go there if the market in general, i.e. most of the individual traders, […]

The Importance of Contrary Opinion Think about it. The vast majority of beginning traders (80% to 90%) fail to succeed in the first six months and give up. Of course, they don’t all take the time and the care that you are in learning to trade, so failure is quite likely. Nonetheless, what does that […]

Moving Average Convergence/Divergence I mentioned in the last module the oscillator that is made up of two exponential moving averages, and it goes under the splendid name of Moving Average Convergence/Divergence Indicator. This is usually shortened to MACD, and it is pronounced Mac-dee. This was invented by Gerald Appel, and it combines the attributes of […]

Oscillator Variables Just as with the moving averages, you are free to change the number of time periods that any of these oscillators and indicators use, and you will find different results. With moving averages, you use the smoothing of the values with larger numbers of periods to create a trend indicating line, whereas smaller […]

Williams %R The Williams oscillator is based on a similar idea, taking account of the position of the price close in relation to the price range over a certain number of days. It is shown below for 20 days. In practice the close is subtracted from the price high for the last 20 days, and […]

Stochastics The Stochastic Oscillator was invented by Dr. George Lane, and for a period in the 1990s it became a Holy Grail for traders. It goes into more depth on the price action than many other oscillators, which may explain its effectiveness. The initial idea on which it’s built is that in an uptrend the […]

Relative Strength Index The relative strength index is a very popular indicator, invented by Wilder about three decades ago (1978 to be exact). The RSI indicator serves to warn when a market has been overbought (i.e. risen too much) or is oversold and the technique is valid for any market including stocks, forex pairs and […]

Commodity Channel Index As you can tell by the name, the Commodity Channel Index (CCI) was originally developed with commodities in mind. It’s also used for futures and options. Here it is on the share chart we’ve been looking at –   The creator of this oscillator, Lambert, decided to compare the current price with […]

Momentum Indicator The Momentum Indicator gives us an indication of the rate at which prices are rising or falling. It’s really just what you would expect from the name, and is one of the most basic ways to make an oscillator. You generate it by taking the difference between two prices, the current day and […]

Using Oscillators in Trending Markets I’ve said it before but it bears repeating. Most of the time we want to trade with the trend to minimize our risk. First and foremost, you need to analyze the chart and identify the basic trend. Only once you have formed a picture of the way the security is […]