Price Oscillators Enhanced for the Modern Market

How to Create & Use Center Line Price Oscillators


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 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. Often times 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. Watch a webinar about Stock Leading Indicators for the Stock Market today.

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price oscillators enhanced for the modern market - technitrader
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.
chart example showing a relational center line that trends with price oscillator - TechniTrader

Wilder’s RSI with its one line for oscillation is the most adaptable and easiest patterns to learn, when incorporating this kind of Center Line Oscillation into your indicator tool set. It was written in the 1970’s and is unique for a Price Oscillator. Instead of just calculating Overbought/Oversold, its formula analyzes current price action to prior price action similar to what many Volume Oscillators track. This helps reveal Dark Pool activity which tends to precede the sudden runs and gaps caused by High Frequency Trading Firms. This makes it an invaluable indicator to use for short-term trading.

The Floating Center Line has a softer Oscillation, which provides pivotal signals in the Price Patterns. This Hybrid Indicator can be applied to many other Price and Volume based Indicators as well. This Price Oscillator enhanced for the Modern Market provides a more three dimensional and Relational Analysis™ that is needed for the more complex Market Structure of today. Watch a webinar about Relational Analysis.


TechniTrader is "The Gold Standard in Stock Market Education." Go to the TechniTrader.com Learning Center and watch the Relational Analysis webinar, to experience for yourself the excellence of TechniTrader education.

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Oscillators can be far more valuable and useful when adaptations and adjustments are made to the older indicators. This gives the Technical Trader more indicator signals, more analysis scope, and further breadth of understanding of Price action. The more a Technical Trader UNDERSTANDS price behavior, the better trading decisions they can make.

Using both Center Line Price Oscillators and Volume Oscillators, enhances and improves the overall indicator analysis for all Trading Styles. Each Trading Style will require modifications to the settings and periods for each Indicator.

Summary

The RSI/RSI Indicator shown in the chart example is part of the TechniTrader Indicator Tool Set provided to Students with instructions on how to use it with all the Variables, Combination Indicators, Indicator Settings, and Periods. It is one of the most versatile of all the price indicators, and is a Price Oscillator enhanced for the Modern Market.

Not yet TechniTrader Students can use this theory to design their own Indicators. The ideal Oscillators have one Oscillation Line rather than two.

TechniTrader is "The Gold Standard in Stock Market Education." Go to the TechniTrader.com Learning Center and watch a variety of webinars, to experience for yourself the excellence of TechniTrader education.

Go to the TechniTrader 

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Trade Wisely,

Martha Stokes CMT

TechniTrader technical analysis using a TC2000 chart, courtesy of Worden Bros.

Chartered Market Technician
Instructor & Developer of TechniTrader Stock and Option Courses
TechniTrader DVDS with every course.

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Disclaimer: All statements are the opinions of TechniTrader, its instructors and/or employees, and are not to be construed as anything more than an opinion. TechniTrader is not a broker or an investment advisor; it is strictly an educational service. There is risk in trading financial assets and derivatives. Due diligence is required for any investment. It should not be assumed that the methods or techniques presented cannot result in losses. Examples presented are for educational purposes only.