Oscillating Indicators – Introduction

Oscillating Indicators – Introduction

As their name suggests, oscillating indicators are indicators that move back and forth as prices rise and fall. Oscillating indicators can help you decide how strong a current trend is and warn when that trend is in danger of losing momentum and being reversed.

When an oscillating indicator moves too high, the share or CFD is considered to be ‘overbought’ (too many people have bought it and there are not enough buyers left in the market to push the price higher). This indicates the upward trend is at risk of losing momentum-causing the trend to reverse or the price to stagnate.

When an oscillating indicator moves too low, the share or CFD is considered to be ‘oversold’ (too many people have sold it and there are not enough sellers left in the market to depress the price). This indicates the downward trend is at risk of losing momentum-causing the trend to reverse or the price to stagnate.

The following oscillating indicators are worth examination:

  • Moving average convergence divergence (MACD)
  • Slow Stochastic
  • Relative Strength Index (RSI)

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