Forex Technical Indicators: Oscillators

Professional forex traders use technical indicators in conjunction with one another in order to set their own comfortable trading range and determine the important entry and exit points. In this article we will examine the basics of another major group of forex technical indicators - the oscillators.

Oscillator Basics

Moving averages and trends are of primary importance when studying currency price movements. However, forex traders who use technical analysis turn to oscillators when the charts they are studying are not showing definite trends in any direction. Thus, oscillators are found most advantageous in charts that are non-trending.

Oscillators represent a useful technical analysis tool for discovering short-term overbought or oversold forex market conditions. Using oscillators can help forex traders notice when the currency is moving into an overbought/oversold situation and consider selling/buying it. The signals that oscillators give are considered to be of greatest value when they are located at the extremes of their scales. Additionally, the crossing of the zero line, when applicable, generally gives direction signals.

Types of Oscillators

There are several types of oscillators used in technical analysis. Some of the most common of them are:

• Stochastic oscillator

  The stochastic oscillator is a momentum indicator which compares a currency's closing price to the price range of that currency over a certain time period.

• Relative Strength Index (RSI)

  The RSI is technical momentum indicator determines a currency's overbought and oversold market conditions by measuring the relative price changes between the highest and lowest currency close prices.

• Rate of Change (ROC) momentum oscillator

  The ROC is technical momentum indicator which measures the percentage change between the current price and the price certain periods ago.

To be successful at forex trading you need two main things - the knowledge and the right trading plaftorm. For a trading platform we can recommend you Easy Forex. It offers unique features such as Inside Viewer™, which will give you a unique insight of what other traders are doing, competitive spreads, 24/7 support, etc. Start trading from as little as $25.

Bookmark this page (CTRL+D) :