Oscillators, one of the most interesting groupings of technical indicators, are designed to signal oscilador estocastico forex converter and oversold levels. Oscillators are a family of indices that go beyond the mathematics. They focus on one important thing and that is momentum, or more specifically changing momentum. Before we delve into which Oscillators are best to use and how, let me save you some unnecessary pain.
Rest assured when I tell you they are not. Oscillators’ main use is not to tell you whether to buy or sell. Rather, they alert you to when it might be a good time to execute a buy or sell strategy. That is a very big difference. Those who attempt to use Oscillators as an ultimate buy or sell signal should be ready to learn a tough lesson. Now that we’ve established what oscillators are good for let’s focus on which oscillators are worth your time and how to use them.
What it does need is a proper explanation of how to use it and when. The idea of MACD is to signal your entry point when you’ve already figured out where the trend is going. It’s not going to alert you to a trend. What that means is that you first have to perform your technical analysis.
Once you reach a conclusion, then you can use the MACD. 12 represents the fast Exponential moving average, 26 the slow exponential moving average and 9 the Simple MACD average. Usually, when you trade on a daily basis, those parameters are fine. Now in the chart below we see two points, A and B. In point A, the histogram moved above the average and that is supposed to be a buy signal. But, technical common sense says that a pronged bearish trend cannot end abruptly without some form of double bottom.
Hence, one should ignore that signal. But in point B, that’s a different story. After a double top that hits a resistance level and hits the trend average, there’s a case for a short. But we need to know when. Notice how after the second top the histogram in the MACD falls again below the average? That’s our mark and that is how you use MACD to time your trade.
Once again, the lesson here is that Oscillators are for timing, not for point to the pair’s direction. The idea of the stochastic oscillator is twofold. First, it’s normalized from 0 to 100, anything below 20 is oversold and anything above 80 is overbought. Thus it affords a 2-dimensional use of momentum. Here’s a classic example of how I would use a stochastic oscillator.
In the first part, we can see that in point C, after the pair has bottomed, the stochastic oscillator was below 20. We can conclude that there the pair is bottomed out, through a double bottom pattern. We can use the oversold level as enforcement but wait before dipping our toes into a buy position. Only in point D, as the blue line crosses the red line, we get our signal for entry. However, one other thing is important to note and that is point E. In point E we get the blue line crossing the red line as it does with C.