How to use an Oscillator to see the end of a trend
Oscillator is an object or data that always moves back and forth between two points, maybe if you still remember high school lessons about back and forth, then you will understand what we are talking about.
Okay, let’s continue the lesson, indicators including the oscillator include Stochastic, Relative Index Index (RSI), and Parabolic SAR. And I need to remind you that each of these indicators is designed to see the movement of the trend reversal type, which is the opposite of the previous direction.
For more details, let’s discuss the user example on the GBP / USD chart below.
We will use three indicators into the price movement chart of the GBP / USD currency pair, namely Parabolic SAR, RSI, and Stochastic.
As seen, all the indicators we display all give BUY signals at the end of December. If we open a trading order position then at least 400 pips will be obtained. MANTAB right!
Then the third week of January the third indicator shows a SELL signal and if you really take a trading position for the next 3 months you will get a very large PIP bro.
And around April all RSI, Parabolic SAR and Stochastic indicators give SELL signals again. How do you still not believe in the benefits of the Oscillator indicator!
Okay, let’s look at an example of a leading oscillator that gives a wrong signal and we don’t have to open a trading position.
In the following example below the three indicators are not compact in giving a signal so that when we encounter this kind of thing we must be careful.
For example, Parabolic SAR gives a SELL signal in mid-February while Stochastic shows the opposite signal. So the question is which indicators need to be followed?
And while RSI does not provide any signal that can be used as a reference.
Please see the graph above. You will know that a lot of signals given by all three indicators do not support each other.
During the second week of April both the Stochastic and RSI indicators provide SELL signals while Parabolic SAR has no signal. And the price continues to move upwards, if you open a SHORT position then it is certain that you will lose money.
Likewise in mid-May if taking a BUY position refers to the Stochastic and RSI indicators by ignoring the Parabolic SAR indicator.
So what’s wrong with the three indicators that we have set to determine BUY or SELL signals on the price movements of the above currency pairs?
The answer lies in how to calculate each indicator above.
So what we need to pay attention to is that we must be careful to use all technical indicators of analysis. Do not impose conditions too much. If indeed the trading conditions do not allow to open an order position, do not do it. Wait or find another moment that is better and provide better opportunities, of course.