Trading with Oscillators - FOREX TRADING FOR PROFIT

Forex Trading For Profit

Trading with Oscillators

No ratings yet.

Share on...

If trend indicators appear on the actual chart, right on the candles, oscillators are different. They are plotted in a separate window, right at the bottom of a chart. The thing that is missing when trading with trend indicators is the fact that, because they lag, price reversals are difficult to spot. It is not the same when trading with oscillators.

An oscillator is the result of a mathematical formula that applies to previous prices. Usually, this formula is based on the closing prices of the candles considered. Nevertheless, the oscillator places a value at current prices. It means that if the actual price of the day plots a value when a candle closes, the oscillator is doing the same.

Most of the times, the oscillator is mimicking the price movements. Traders use oscillators to find differences between the two. Because the oscillator considers more candles before plotting a value, it is viewed as more reliable. Therefore, if one is to choose between price and oscillator to find out which one is making a fake move, chances are the price is showing that move.

The oscillator is always to one to rely upon. The most famous oscillators used by retail traders are:

  • Relative Strength Index (RSI). The RSI is one of a kind. There is no trader in this world that doesn’t know about it. The default setting or period for the RSI indicator is 14. It means that it considers the previous 14 candles before plotting a value on the screen. For this reason, it is more reliable than the actual price. The RSI travels only in positive territory and shows overbought and oversold levels. An overbought level is considered when the price travels above the 70 level, while an oversold level is when the RSI dips below the 30 level. Traders sell in the first case and buy the second one. While this is true in ranging markets, in trending markets this approach is not that good in terms of the profitability of the signals being generated. The best way to trade with the RSI is to use overbought and oversold levels in ranging markets (like in the Asian session, that is dominated by ranges) and look for bullish or bearish divergences in trending markets, as they will help to spot early reversals.Oscillators - Relative Strength Index
  • Commodity Channel Index (CCI). The CCI is an oscillator that is more volatile than the RSI. When compared with the RSI, the CCI travels in negative territory too. The CCI’s default settings show the 100 and -100 levels, but this doesn’t mean the oscillator is traveling only between these levels. In strong market swings, the CCI can go even to 300 or -300 or more. While it is an oscillator, it is difficult to trade divergences with it. Most of the traders are using a move above 100 as an opportunity to go short and a move below -100 as an opportunity to go long. Beware though that this is something that doesn’t hold true all the time.
  • Moving Average Convergence Divergence (MACD). The MACD has two main components: a histogram and a signal line. When the histogram rises, the market is bullish and when it falls, the market is bearish. The MACD travels in the negative and positive territory, and it can be traded in two ways. One is to look for divergences between price and the MACD’s histogram. A bullish one calls for a long trade, and a bearish one calls for a short trade. Another way is to simply look at the moment the oscillator crosses the zero level for a follow-up trade.

All these oscillators have one thing in common: they are more reliable than price because they are based on multiple candlestick prices. Even when trading CFD or other financial products, the principle is the same: look for divergences between the actual price and an oscillator.

forex trading

Share on...

Please rate this

Leave a Comment

Be the First to Comment!

Notify of
Photo and Image Files
Audio and Video Files
Other File Types

Forex Trading For Profit

Forex TFP

A journey of a retail trader. How to trade on the foreign exchange market and make it a lifstyle.

Comodo SSL
  • Facebook logo
  • Twitter logo
  • YouTube logo
  • Linked in logo

We have been voted in the top 100 Forex Sites


Forex Trading

Forex Trading For Profit, a journey of a retail trader. This website has been set up for retail traders to give answers to those seeking the same information I was when I first started trading. Forex Trading For profit endeavours to bring the most informative approch to trading forex, and shows anyone can become a successful trader no matter what your background, with some dedication, study and determination. Trading CFD's and in the foreign exchange market is a high risk investment so please read the disclaimer.

DISCLAIMER: Any advice or information that has been presented on this website and related accounts on social media forums is only general advice and is not intended for you to invest your money solely based on its contents. By viewing the content on this site you agree that it’s for educational purposes only and will not hold the Author responsible for any loss incurred by the content herein and associated online accounts or paraphernalia. Forex Trading for profit nor do the Author('s) operate under an AFSL and any product or advice sold on this site is only bought or taken as an educational product or guide from my collective experience’s and knowledge trading forex. If you invest any money into forex you do solely at your own risk.

HIGH RISK WARNING: Trading CFD’s such as forex and/or on high leverage is a high risk investment and you must make yourself aware of the potential loses you may incur. Forex trading is not suitable for all investors and you have the potential to lose all of your deposited funds or more. Any opinions or analysis of the financial markets on this site is ONLY commentary in nature and does not solicitate investment advice. Please do not invest any money based on the advice given on this site or associated accounts nor invest money that you cannot afford to lose. Past performance of any trading system or method is not indicative of future results.

Privacy policy

What information do we collect?

We collect information from you when you fill out the form. When ordering or registering on our site, as appropriate, you may be asked to enter your: name, e-mail address or phone number. You may, however, visit our site anonymously.

What do we use your information for?
Any of the information we collect from you may be used in one of the following ways:

For contact purposes and conversing requirements between staff and client.

How do we protect your information?
We implement a variety of security measures to maintain the safety of your personal information when you enter, submit, or access your personal information.

Do we use cookies?
We do not use cookies.

Do we disclose any information to outside parties?
We do not sell, trade, or otherwise transfer to outside parties your personally identifiable or business information. This does not include trusted third parties who assist us in operating our website, conducting our business, or servicing you, so long as those parties agree to keep this information confidential. We may also release your information when we believe release is appropriate to comply with the law, enforce our site policies, or protect ours or others rights, property, or safety. However, non-personally identifiable visitor information may be provided to other parties for marketing, advertising, or other uses.

Third party links
Occasionally, at our discretion, we may include or offer third party products or services on our website. These third party sites have separate and independent privacy policies. We therefore have no responsibility or liability for the content and activities of these linked sites. Nonetheless, we seek to protect the integrity of our site and welcome any feedback about these sites.

Childrens Online Privacy Protection Act Compliance
We are in compliance with the requirements of COPPA (Childrens Online Privacy Protection Act), we do not collect any information from anyone under 13 years of age. Our website, products and services are all directed to people who are at least 13 years old or older.

Your Consent
By using our site, you consent to our web site privacy policy.

Changes to our Privacy Policy
If we decide to change our privacy policy, we will post those changes on this page.

Contacting Us
If there are any questions regarding this privacy policy you may contact us using the information below.

Back to top

© 2019 Forex Trading For Profit. · Disclaimer · Privacy policy