Info 1: Oscillator definition
Info 2: how Oscillator works
Info 3: Oscillator vs moving average
Info 4: example of Oscillator
Opening information:
The oscillator represents a wave that follows the equilibrium of the trading in the graph chart.
So now let’s have a look what is a Oscillator , how the Oscillator works in the public market, and what is the difference between the Oscillator and moving average, finally one clear example about oscillators.
Info 1: Oscillator definition
There was a 27-year-old woman named Rebecca. Short-time trading became a passion for her. But, her profession is law.
She once wanted to buy 2500 shares in Jacono, a commodity company in the public market. So, she created a graph based on past and present stock fluctuations of Zacono Public Company.
She wanted to use a technical tool to find out when it would be good to buy the stock. So in the graph, she set the moving average value.
Also, in the horizontal direction, she set upper bands above the moving average and low bands below the moving average. Also, she fixed the value of these two bonds, lower and upper.
And Rebecca determines that these two bonds will have extreme maximum and minimum values. However, this trading indicator used by Rebecca achieved price fluctuations within these two bonds.
Considering this, Rebecca bought 2500 shares of Jacono Public Company as planned at the moment when the market reached the lowest extreme value. Also, a few months later, when the market reached the maximum extreme value above the upper band, Rebecca sold 2500 shares of Jacono Public Company.
Of note is the technical tool used by Rebecca, which is a type of momentum indicator. Thus trading using indicators in the above manner is called Oscillator.
For this reason that’s used technically to find the extreme value or lowest value and the overbought position and oversold position became an Oscillator. Because the Oscillator determines multiple tools that need function.
So now let’s dive into how this Oscillator is involved and works in the stock market.
Info 2: how the oscillator works
Oscillator doesn’t represent any of the fixed specific things or objects instead it’s an indicator that is used to trade the public securities technically.
However its purpose is based on tracking and reporting the signal of Securities behavior over any amount of certain period at the different output.
Supposedly if the indicator doesn’t have the Function of finding and calculating the different output values to trade the Securities it couldn’t be considered as an Oscillator.
The oscillator is not one tool indeed it refers to the multiple range of tools that apply the function of finding the over-bought and over-sold condition on the trading securities.
If any of the technical tools are used to trade with the function of two lines that calculate and dividend with 14 days or any amount of days value by subtracting the 14 days low and recent closed, then 14 days high price with low price is called a Stochastic oscillator.
When its final value is above 80 percent the traders would have a sell signal because of over and when the trader would have a last value of less than 20 Percent which demonstrates the buy signal.
Next, the Indicator tracked the level of average trend strength of over-bought and over-sold positions for any amount of securities by calculating any amount period of average growth such technical tool is elaborate as the relative strength index (RSI).
For the reason of tracking the over-purchased or more sold position, this tool of RSI is also illustrated as an Oscillator.
On the other hand, the indicator used two exponential moving averages (EMA) to finalize the value as over-bought and over-sold position which are named as MACD indicator. This indicator function also was included in the oscillator.
Any of the technical tool indicators which are work with the purpose of finding the over-bought and over-sold position for any stock Currencies that came in Oscillator.
Most of them confuse the Oscillator and movie average, so let’s jump into the key difference in it anyway.
Info 3: Oscillator vs moving average
Oscillator refers to the equipment that occupies multiple amounts of tools to find the complex method position to arrive at the over-bought and over-sold things.
Next, the moving average is also a technical tool is calculates the average move over a certain amount of period. So the moving average is a part of the oscillator.
To make more sense of oscillators, let’s see one brief example below.
Info 4: example of oscillator
Say you and your brother are the stock Investor and two of you had 12 years on the market. You trade the stock using the technical indicator called the Awesome Commodity Channel Index.
And your brother relies on the fundamentals analysis before making any Investment. This makes your brother long-term.
Here your used tool is an Oscillator, and your brother won’t have any indicator and is named as a long-term Investor.