The Benefits of a New Type of Price Oscillator
Most Price
Oscillators are designed strictly for overbought or oversold conditions. These
indicators work well when price is oscillating between a high and low range,
but tend to show overbought signals when a stock is about to go momentum. The
tendency for these the older style overbought/oversold price oscillators is to
show an overbought crossover signal as price begins momentum action, which
often causes Technical Traders to exit a trade just before huge profits could
have been captured.
By using a Center Line Price Oscillator during momentum phases of price action Technical Traders can hold, instead of selling just as the stock is about to run with strong velocity or momentum action.
The TechniTrader Center Line Price Oscillator called TTRSI uses a floating center line that provides flexible indicator action as price moves up. It is ideal for momentum and velocity price action as it will reveal the underlying momentum, whereas a standard price high/low range oscillator such as Stochastic shows an extreme overbought pattern that most traders use as an exit signal.
The chart example
below shows the TTRSI indicator with center line oscillation in the middle
chart window, and Stochastic in the bottom chart window for easy comparison.
This indicator is
designed for analysis of price during a momentum or velocity run, and it is
superior to Stochastic for momentum analysis.
Traders using Stochastic would have exited prior to the big gain day missing out on the largest one day gain for this run, that continued the next day. RSI then indicates the run has fatigued, and the risk of profit taking at this point means either exit or tighten the intraday stop loss.
Summary
Center Line Price Oscillators are superior to standard overbought/oversold price oscillators during momentum and velocity Market Conditions. Momentum or velocity price action occurs after giant lot Buy Side Institutions have been accumulating a stock for some time by suing Dark Pools. When Professional Traders and High Frequency Trading firms HFTs discover this accumulation then they drive price upward out of Bottoms, minor Corrections, Platforms, Consolidations, and Compression Patterns.
Center Line Price Oscillators are superior to standard overbought/oversold price oscillators during momentum and velocity Market Conditions. Momentum or velocity price action occurs after giant lot Buy Side Institutions have been accumulating a stock for some time by suing Dark Pools. When Professional Traders and High Frequency Trading firms HFTs discover this accumulation then they drive price upward out of Bottoms, minor Corrections, Platforms, Consolidations, and Compression Patterns.
Using a Center Line Oscillator for price enables Traders to hold longer, and enjoy the gains of a momentum or velocity run.
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Trade Wisely,
Martha Stokes CMT
TechniTrader technical analysis using a MetaStock chart, courtesy of Innovative Market Analysis, LLC dba MetaStock
Chartered Market Technician
Instructor & Developer of TechniTrader Stock and Option Courses
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