The Volume Oscillator consists of two moving averages of volume, one fast and one slow. The fast volume moving average is then subtracted from the slow moving average. An increase or decrease in price accompanied by an increase two 555 oscillators forex volume may be considered a sign of strength in the prevailing trend. Volume Oscillator is above the zero line and may be confirming price direction, whether it be up or down.
An increase or decrease in price accompanied by a decrease in volume may be considered a sign of weakness in the prevailing trend. Therefore, when the fast volume moving average is below the slow volume moving average, the Volume Oscillator is below the zero line and may be warning that the price direction is lacking strength and conviction. The fact that price is making higher highs and higher lows might be viewed by many traders as a bullish sign. When the price increases in the Russell 2000 e-mini is combined with the Volume Oscillator making higher highs and higher lows, a trader may consider this to be even more bullish. The Volume Oscillator can be used as a confirmation indicator, as it was above with the Russell 2000 e-mini future, or it can be used to detect divergences, as will be discussed on the next page. The information above is for informational and entertainment purposes only and does not constitute trading advice or a solicitation to buy or sell any stock, option, future, commodity, or forex product.
Past performance is not necessarily an indication of future performance. The stochastic momentum indicator is one of the most popular technical analysis indicators used by Forex traders. The Stochastic Oscillator was invented by a Chicago-based securities trader and renowned technical analyst George C. The Stochastic indicator belongs to a cluster of oscillating technical indicators, which are calculated using a fixed number of time periods and wherein its values fluctuate within a set range around a center line. Similar to the Stochastic Oscillator, a handful of other Oscillator indicators were developed around the same time using similar principles.
Most beginner Forex traders get confused about how to correctly interpret the Stochastic Oscillator signals under varying market conditions. If you misinterpret the market environment, the same Stochastic Oscillator value can translate into a very different signal. This is where most beginner Forex traders fail. They simple apply the Stochastic Oscillator in the same manner, regardless of the underlying market condition, and end up losing money as a result. If you have felt frustrated when trying to apply the Stochastic Oscillator, then this lesson will certainly help you to better understand how the indicator generates its signals, how to interpret the signals, and how to apply the stochastic indicator signals correctly under different market conditions.
The key to using a technical analysis indicator is to know how the indicator values are calculated. Compared to some of the more complex technical indicators, the formula used to calculate the Stochastic Oscillator is rather straightforward. K value is set to 5 in figure 1. However, most traders calculate the Stochastic Oscillator based on 14 periods, which can be 14 days on a daily chart or 14 hours on an hourly chart for example.