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Price Oscillator

Price Oscillator

  1. Price Oscillator Defined
  2. Price Oscillator as an Overbought & Oversold Indicator

The Price Oscillator uses two moving averages, one shorter-period and one longer-period, and then calculates the difference between the two moving averages. The Price Oscillator technical indicator can suggest areas of overbought and oversold conditions as well as attempting to confirm bullish or bearish price moves.

The moving averages lengths are defined by the user. In the chart below of the E-mini Russel 2000 futures contract, the 9-day and 18-day moving averages are used:

Price Oscillator consists of two moving averages

When the 9-day moving average crossed over the 18-day moving average, the Price Oscillator crossed over the zero line. When a short-term moving average crosses over a long-term moving average, a bullish crossover occurs. A trader might consider bullish crossovers to be a good time to buy.

Likewise, when the 9-day moving average crossed below the 18-day moving average, the Price Oscillator crossed below the zero line. When a short-term moving average crosses below a long-term moving average, a bearish crossover occurs. A trader may consider the bearish crossover a good time to sell.

The Price Oscillator makes it easy to see moving average crossovers. The Price Oscillator might also be a means to detect overbought and oversold conditions; this is discussed on the next page.

Next Page - Price Oscillator as an Overbought & Oversold Indicator

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