Monday, February 8, 2016

020516 MetaStock - Center Line Price Oscillators NEM chart

Center Line Price Oscillators
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 exteme 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 Stochastics 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.
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.
Trade Wisely,
Martha Stokes CMT
TechniTrader technical analysis using a MetaStock chart, courtesy of Innovative Market Analysis, LLC dba MetaStock

Instructor & Developer of TechniTrader Stock & Option Courses

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Disclaimer: All statements are the opinions of TechniTrader, its instructors and/or employees, and are not to be construed as anything more than an opinion. TechniTrader is not a broker or an investment advisor; it is strictly an educational service. There is risk in trading financial assets and derivatives. Due diligence is required for any investment. It should not be assumed that the methods or techniques presented cannot result in losses. Examples presented are for educational purposes only.

1 comment:

Anonymous said...

perfect article! I like it to much!