If we consider modern currency and stock markets, we will find out that a movement within them occurs in two directions only: either trend or flat. When we assume that there is a trend in the market, then the trend indicators have to be used. And if there is the flat in the market, the oscillator analytical tool is used by investors. Its essence consists in the analysis of quotes within the narrow price movement, and it provides a trader the possibility to find the ideal point to enter into the market.
Specificity of oscillators
Oscillators are the special indicators which work based on the analysis of the overbought and oversold zones. In other words, there are the extreme points that show the weakness of the certain position and its possibility to reverse in the opposite direction. These indicators usually determine the special levels, achievement of which signalizes to an investor that he has to look for the ideal price for the option’s purchase in the opposite direction from the current movement.
Types of oscillators
There are many oscillators that can be used by traders in their work. This list can change depending up the platform, which is applied in work. However, we can mark the following main oscillators:
- Bill Williams’ oscillator
These and other are applied in trading in the currency market in two directions only. We have discussed the first of them partially. This is the determination of the reference points which show the possibility of opening the short-term positions when the market is passive and the sideways movement occurs within it. This is the classic usage of such tools. Besides, the second variant of this oscillator’s usage is applied too, and it consists in the determination of the potential during the trend movement. In other words, in this case, the considered indicators act as the some sort of the confirming tool, which can determine the potential of a movement.
The beginners in trading frequently experience difficulties in the determination of the current stage of the market. How to find out which one trend prevails in the market: ascending or descending? In order to answer to this question, you can use oscillators. If you see this indicator in an upper part of the window, it means that the market is the bullish one. And if the indicator is located in a lower part of the window, then you have the bearish market.
Thus, oscillators turn out to be the complex analytical tools which can be used by traders within the technical analysis process in order to work in the flat markets.