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Chapter 13, Part II. Leading Indicators – Oscillators. Page 4

Discussion in 'Complete Trading Education- Forex Military School' started by Sive Morten, Dec 20, 2013.

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  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Pipruit: Ok, I see. So, there are not any leading indicators, I mean oscillators or something like that?
    Commander in Pips: There are some.

    1. Detrended oscillator (DOSC) and Momentum Indicator. You may use it for estimation of future levels of overbought and oversold. If you do not remember, what DOSC or Momentum is – revisit the corresponding chapter.

    Pipruit: Commander, I remember what DOSC and Momentum are, and how to apply them. But why is it a leading indicator? Where is its leadership?
    Commander in Pips: That’s right. If you remember, we use historical extreme values of momentum as levels of overbought and oversold on the market. Other words, when momentum reaches this level, we treat market as overbought an oversold, right?

    Pipruit: Right, and what then?
    Commander in Pips: So, you know these extreme levels ahead of time since they are historical, and because they are relatively stable. Close price n-period ago you know as well. So, you easily can estimate what close price should be today at which market will reach an overbought or oversold level…

    Pipruit:
    Wow, and this is really true. How I can’t get it by myself. So, then we get the formula as follows:

    Today close price = Momentum extreme level (known) + Close n-periods ago (known).
    Commander in Pips: That’s right, so you know even before the start of today’s trading session, at which level market will be overbought or oversold. And you could apply it at any time frame!

    The same calculation you may do with DOSC indicator.

    Commander in Pips: The next indicators are not spread wide, only some expensive software programs (such as CQG, Genesis Trade Navigator and some others) have them, but still they exist:

    2. DiNapoli Oscillator predictor (OscP). This indicator shows levels of overbought and oversold one period ahead of time. It looks very akin to Bollinger Bands indicator, but they are not the same, because they have absolutely different math. Here is what it looks like:


    Chart #3 | EUR/USD Daily and DiNapoli Oscillator Predictor
    [​IMG]
     
    #1 Sive Morten, Dec 20, 2013
    Lasted edited by : Mar 25, 2016
    Hamza Samiullah and fran alvarez like this.
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