Forex Oscillators: Forex Technical Analysis
The name of oscillator derives from the Latin word oscillo which means “I swing”. In technical analysis oscillator is the mathematical expression of the speed of price movements over time. By their form oscillators are advanced indicators.
Basic concepts of using oscillators are the overbought and oversold conditions of market. The market is considered overbought when the price is near its upper limit, and its further improvement is unlikely. Oversold zone is characterized by such a low price, that at the given moment its further downturn is unlikely. Although the analysis and use of oscillators best of all are represented at the constant state of market, the time of trend reversal can also be determined by their help.
To identify a trend reversal it’s necessary to understand the concepts of convergence and divergence of the curve oscillator with the direction of price movements.
RSI-Bars is an oscillator, developed by IFC Markets in 2014 as the modification of Relative Strength Index (RSI). RSI-Bars characterizes a stability of a price momentum and allows a definition of a trend potential.
A distinctive feature of RSI-Bars is that this indicator takes into account the volatility of a considered instrument within the selected timeframe - values of RSI-Bars are defined with account of price OPEN/HIGH/LOW/CLOSE (OHLC) values and are displayed in the form of chart bars. This allows avoiding of false breakdowns of oscillator trend lines and that’s why traders may use methods of a chart analysis more efficiently in this case.
The Average True Range (ATR) indicator was introduced by Welles Wilder as a tool to measure the market volatility and volatility alone leaving aside attempts to indicate the direction. Unlike the True Range, the ATR also includes volatility of gaps and limit moves. ATR indicator is good at valuating the market's interest in the price moves for strong moves and break-outs are normally accompanied by large ranges.
Bollinger Bands indicator is one of the most popular technical indicators for traders in any financial market, whether investors trade stocks, indices or foreign exchange (Forex).
Bollinger Bands are a highly popular technical analysis technique which is developed by famous technical trader John Bollinger. He developed the technique of using a moving average with two trading bands above and below it.
The Commodity Channel Index is an indicator by Donald Lambert. Despite the original purpose to identify new trends, it’s nowadays widely used to measure the current price levels in relation to the average one.
The Demarker Indicator is a tool which was introduced by Tom DeMark to help identify emerging buying and selling opportunities. Demarker Indicator demonstrates the price depletion phases which usually correspond with the price highs and bottoms.
The Envelopes indicator reflects the price overbought and oversold conditions helping to identify the entry or exit points as well as possible trend break-downs.
The Force Index indicator invented by Alexander Elder measures the power behind every price move based on their three essential elements, e.g., direction, extent and volume. The oscillator fluctuates around the zero, i.e., a point of a relative balance between power shifts.
The Ichimoku Kinko Hyo (Equilibrium chart at a glance) is a comprehensive technical analysis tool introduced in 1968 by Tokyo columnist Goichi Hosoda. The concept of the system was to provide an immediate vision of trend sentiment, momentum and strength at a glance perceiving all the Ichimoku's five components and a price in terms of interactions among them of a cyclical type related to that of human group dynamics.
Moving-Average Convergence/Divergence Oscillator, commonly referred to as MACD indicator, is developed by Gerald Appel which is designed to reveal changes in the direction and strength of the trend by combining signals from three time series of moving average curves.
Momentum Oscillator is an indicator that shows trend direction and measures how quickly the price is changing by comparing current and past prices.
Relative Vigor Index, developed by John Ehlers, is a technical indicator designed to determine price trend direction. The underlying logic is based on the assumption that close prices tend to be higher than open prices in a bullish environment and lower in a bearish environment.
Relative Strength Index is an indicator developed by Welles Wilder to assess the strength or the weakness of the current price movements and to measure the velocity of price changes by comparing price increases with its losses over a certain period.
Stochastic indicator is introduced by George Lane to identify price trend direction and possible reversal points by determining the place of the current close price in the most recent price range, as in a sustainable uptrend close prices tend to the higher end of the range and to the lower end in a downtrend.
Williams Percent Range (%R) is a technical indicator developed by Larry Williams to identify whether an asset is overbought or oversold and therefore to determine possible turning points. Unlike the Stochastic oscillator Williams Percent Range is a single line fluctuating on a reverse scale.