Williams%R, Rate of Change (ROC) and Advance - Decline (A/D) Line. Comparison and Best Use of Six Oscillators
Mastering the Market Beat: Strengths & Weaknesses of 6 Momentum Oscillators and How to Use Them in Your Favor
Trading is about consistency, this publication connects different analyses, and educational content to provide a coherent view of the market, timeframes and use of technical indicators.
In the world of trading, an oscillator is a technical analysis tool that helps visualize the momentum of an asset's price movement. Imagine it like a gauge on your car's dashboard that shows how fast the engine is revving (price movement) but doesn't tell you the exact speed (future price).
Here's what oscillators are typically used for:
Identifying Overbought and Oversold Conditions: Oscillators often have defined upper and lower zones. When the oscillator reaches the upper zone, it suggests the asset might be overbought (investors are piling in, potentially leading to a price drop). Conversely, reaching the lower zone might indicate an oversold condition (investors are selling heavily, potentially leading to a price rise).
Gauging Momentum Strength: The speed and direction of the oscillator's movement can indicate the strength of the current price trend. A rapidly rising oscillator suggests strong buying momentum, while a steadily declining one might signal weakening bullishness.
Identifying Potential Reversals: When the oscillator makes a move that contradicts the price movement (divergence), it can be a sign of a potential trend reversal. For example, if the price keeps making new highs but the oscillator starts to decline, it might suggest the uptrend is losing steam and a price correction could be coming.
Decoding Momentum: Williams %R, ROC, and A/D Oscillator
The first edition of Level Up Your Trading included MACD, RSI and Stochastic, today’s edition includes three additional indicators to the oscillators menu, if you’re a new subscriber, check the first edition before continuing:
Today, a table comparing the six oscillators studied so far will summarize the differences among all of them and the examples will consider SPX in different timeframes and the most important chart to watch that was posted during the weekend:
1. Williams %R (Williams Percent Range):