Indicators & Oscillators

Technical indicators themselves are formed by entering information about the security's past and current prices - like opening, closing, high and low prices and volume information - into a formula to calculate data points that can be plotted on or alongside a price chart. Because one data point won't tell you much about a security, multiple points are needed to study price patterns effectively.

Typical examples of indicators include Moving Averages, which have relatively simple formulas and illustrate a price's movement over a regularly updated time period, and Bollinger Bands®, which are more complicated and measure volatility in relation to a moving average.

Though some indicators have unrestricted movement, others are oscillators, which means they either fluctuate above and below a centerline or between extreme high and low levels over a certain period of time. Because oscillator movements are more confined than other indicators, they are less able to trend for significant periods. Oscillators that fluctuate above and below a centerline are called centered oscillators and those that move back and forth between extreme levels are known as banded oscillators.

The Moving Average Convergence/Divergence is an example of a centered oscillator and the Commodity Channel Index is an example of a banded oscillator.

The strategies described in this article are for information purposes only, and their use does not guarantee a profit. None of the information provided should be considered a recommendation or solicitation to invest in, or liquidate, a particular security or type of security. Investors should fully research any security before making an investment decision. Securities are subject to market fluctuation and may lose value.