Price Oscillator Enhanced for the Modern Market
Most traders are very familiar with the standard Price Oscillators which have a high and low range. These Price Oscillators are common and found in nearly every charting program. There are Stochastic, Williams R, Wilder’s Relative Strength Index Indicator and many more oscillators created specifically for determining “Overbought” or “Oversold” conditions.
Stochastic however was written in the 1950’s which was an entirely different market than we have today. Nowadays Technical Traders find that Stochastic tends to give a false negative or a false positive signal, just as the stock is beginning a Momentum or Velocity run up with exponential point gain potential. This often frustrates traders who are still using only the older theory of Overbought/Oversold Trend Conditions.
Today with High Frequency Trading Firms trading stocks in massive order flow on the millisecond scale, Price often appears “Overbought” with the standard Price Oscillators when it is just starting a big run. Oftentimes Overbought Patterns shift to the “Floating Oscillation” Pattern which is a failed signal, due to extreme momentum energy that was not present in the trading environment when these indicators were written.
Using Price Oscillators enhanced for the Modern Market is a method that TechniTrader teaches exclusively. TechniTrader shows how to create a CENTER LINE Oscillator very similar to Volume Center Line Oscillators.
Using Volume and Price Oscillators together can be a huge benefit in entering stocks earlier out of bottoms and tops, which are often flat or basing these days rather than Triple Bottoms or other older style Bottoming or Topping Patterns you may have been taught.
Adding a relational center line that trends with the Price Oscillator can reveal patterns in advance of sudden big moves. See the chart example below.
Martha Stokes CMT
TechniTrader technical analysis using a MetaStock chart, courtesy of Innovative Market Analysis, LLC dba MetaStock
Chartered Market Technician
Instructor & Developer of TechniTrader Stock & Option Courses
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