Moving Average of Oscillator

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Table of Content:
Introduction
Definition of Moving Average of Oscillator (OsMA)
Calculation of OsMA
Interpretation of OsMA
Trading with OsMA
Conclusion

Introduction:

The Moving Average of Oscillator (OsMA) is a technical indicator that measures the difference between an oscillator and its moving average. It is a tool used by traders to determine the strength of a trend in the market and also help identify potential trading opportunities.

Definition of Moving Average of Oscillator (OsMA):

OsMA is calculated by subtracting the value of a short-term moving average from a longer-term moving average of an oscillator. The most commonly used oscillators are the MACD, RSI, and Stochastic. The formula for calculating OsMA is: OsMA = MACD line – Signal line Where MACD line is the difference between the 12-period and 26-period exponential moving averages (EMAs) of a currency pair, and signal line is the 9-period EMA of the MACD line.

Calculation of OsMA:

Here is a step-by-step guide on how to calculate OsMA using the MACD oscillator:

  1. Calculate the MACD line: MACD line = 12-period EMA – 26-period EMA
  2. Calculate the signal line: Signal line = 9-period EMA of the MACD line
  3. Calculate OsMA: OsMA = MACD line – Signal line

Interpretation of OsMA:

The OsMA indicator fluctuates around the zero line, which is the centerline. If the OsMA value is positive, it indicates that the trend is bullish or upward. Conversely, if the OsMA value is negative, it indicates that the trend is bearish or downward. A rising OsMA indicates that the momentum of the trend is strengthening while a declining OsMA implies that the momentum of the trend is slowing down. Traders use the OsMA indicator to confirm market trends and potential reversal points.

Trading with OsMA:

Traders use the OsMA indicator in different ways, but most commonly, they use it to confirm their trading signals. For instance, when trading an uptrend, traders may look for a bullish crossover of the MACD line above the signal line and a positive OsMA to confirm the buy signal. Similarly, when trading a downtrend, traders may look for a bearish crossover of the MACD line below the signal line and a negative OsMA to confirm the sell signal. Additionally, traders may use the OsMA indicator to identify potential divergences between the price and the oscillator.

Conclusion:

The Moving Average of Oscillator (OsMA) is a popular technical indicator that measures the difference between an oscillator and its moving average. It is useful for traders to confirm market trends, identify potential reversal points, and generate trading signals. When used in combination with other technical indicators, OsMA can be a valuable tool to improve trading performance.

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